The Consumer Protection Act 1986 and subsequent amendment
in 1993 and 2002 as also the Consumer Protection Act of 2019 clearly stipulates
that a consumer shall be the one who does not avail services or goods for
commercial purposes. If it is so, the provision of Consumer Protection Act
shall not be attracted. The law as evolved shows what may constitute “commercial
purpose”. The great deal, of course, depend upon the facts and circumstances of
each case, as what could constitute “commercial purpose” is not defined in the
Act. Ordinarily, "commercial purpose" shall encompass within its
ambit manufacturing/industrial activity or business -to -business transactions
between commercial entities. In other words, the purchase of the good or
service should have a close and direct nexus with a profit- generating activity.
Thus, the dominant intention or dominant purpose for the transaction and as to
whether the same was to facilitate some kind of profit generation for the
purchaser and/or their beneficiary. If the dominant purpose, behind purchasing
the good or service was for the personal use and the consumption of the
purchaser and/or their beneficiary, or is otherwise not linked to any
commercial activity, then the same shall not be construed as commercial
purpose. If a purchase was for the purpose of "generating livelihood by
means of self employment" then, the same shall clearly be out of
commercial purposes. What is of significance that personal livelihood aspect
did not find mention in the 1986 Act and subsequently, the said aspect was made
part of the act vide Amendments in 1993 and 2002 in the Consumer Protection
Act, 1986.
The Section 2(1)(d)(ii) of the Act excludes a
person who avails of services for ‘any commercial purpose. The explanation to
the provision shows that if the services availed by him were exclusively for
the purposes of earning his livelihood by means of self-employment, then the
same shall not be construed as commercial purposes.
Section 2(1)(d) of the said Act, as it exists
today, which is as follows: “2.Definition. (1) In this Act, unless the context
otherwise requires, (a)…………………………………………………… ………………………………………
(d) “consumer” means any person who,—
(i)
buys any goods for a consideration which has been paid or promised or partly
paid and partly promised, or under any system of deferred payment and includes
any user of such goods other than the person who buys such goods for
consideration paid or promised or partly paid or partly promised, or under any
system of deferred payment when such use is 6 made with the approval of such
person, but does not include a person who obtains such goods for resale or for
any commercial purpose; or
(ii)
hires or avails of any services for a consideration which has been paid or
promised or partly paid and partly promised, or under any system of deferred
payment and includes any beneficiary of such services other than the person who
hires or avails of the services for consideration paid or promised, or partly
paid and partly promised, or under any system of deferred payment, when such
services are availed of with the approval of the first mentioned person but
does not include a person who avails of such services for any commercial
purpose;
Explanation.—For the
purposes of this clause, “commercial purpose” does not include use by a person
of goods bought and used by him and services availed by him exclusively for the
purposes of earning his livelihood by means of self-employment;”
HISTORICAL
PERSPECTIVES
The legislature upon finding
that, though, there were various provisions contained in various enactments to
protect the consumers and provide relief to them, yet it was felt necessary to
protect the consumers from the exploitation and to save them from adulterated
and substandard goods and services and to safeguard the interests of the
consumers. In order to provide for better protection of the interests of the
consumer, the Consumer Protection Bill was introduced in the Parliament. Perusal
of the ‘Statement of Objects and Reasons’ of the said Act would show that the
said Act seeks to provide for better protection of the interests of consumers
and for that purpose, to make provision for the establishment of Consumer
Councils and other authorities for the settlement of consumer disputes and for
matters connected therewith. One of the objects for enacting the said Act was
the right to be heard and to be assured that consumers’ interests will receive
due consideration at appropriate forums. To provide speedy and simple redressal
to consumer disputes, a quasi judicial machinery was sought to be set up at the
district, State and Central levels. It will be apposite to refer to the
preamble of the said Act, which reads thus:
“An
Act to provide for better protection of the interests of consumers and for that
purpose to make provision for the establishment of consumer councils and other
authorities for the settlement of consumers’ disputes and for matters connected
therewith.”
Over the space of time it was
realized that the commercial purposes and its ambit required further specification
and further, in order to plug loopholes and enlarge the scope of areas covered,
the legislature brought certain amendments to the said Act by the Consumer
Protection (Amendment) Act, 1993 (In
short “1993 Amendment Act”). One of the objects of the said Act was to enable
the consumers, who are self-employed, to file complaints before the redressal
agencies, where goods bought by them exclusively for earning their livelihood,
suffer from any defect. By subsection (5) of Section 2 of the 1993 Amendment Act, the following amendments were
effected to the definition of the term ‘consumer’:
“(5) in clause (d),
(A) in sub clause (ii), for the word “hires”, in
both the places where it occurs, the words “hires or avails of” shall be
substituted;
(B) after sub clause (ii), the following
Explanation shall be inserted at the
end, namely:‘
Explanation. For the purposes of sub clause (i),
“commercial purpose” does not include use by a consumer of goods bought and
used by him exclusively for the purpose of earning his livelihood, by means of
self-employment’;”
Thus, it is apparent that by virtue of 1993
Amendment Act, insofar as services are concerned, wherever the word “hires” was
used, the same was substituted by the words “hires or avails of”.
In he said 1993 Amendment Act, insofar as Section
2(1)(d)(i) is concerned, an Explanation was provided to the effect that ‘commercial purpose’ does not include
use by a consumer of goods bought and used by him exclusively for the purpose
of earning his livelihood by means of self-employment. It could thus be seen
that though the original Act of 1986 excluded a person from the ambit of
definition of the term ‘consumer’ whenever, such purchases were made for
commercial purpose. However, vide the amendment and by the Explanation, which
is an exception to an exception, even if a person made purchases for
‘commercial purpose’, he was included in the definition of the term ‘consumer’,
if such a person bought and used such goods exclusively for earning his livelihood
by means of self-employment.
The legislative intent is clear, that though the
purchases for commercial purposes are out of the ambit of the definition of the
term ‘consumer’ in the said Act, if a person buys and uses such goods
exclusively for earning his livelihood by way of self employment, he would
still be entitled to protection under the said Act.
As hiccups still persisted and with a view to
avoid the bottleneck and impediments as regards the implementation of various
provisions of the said Act and with a view to facilitate quicker disposal of
consumer complaints, and to make the said Act more effective by removing
various lacunae, the legislature amended the said Act by the Consumer
Protection (Amendment) Act, 2002 (In short
“the 2002 Amendment Act”). One of the objects for bringing out the 2002
Amendment Act was “exclusion of services availed for commercial purposes from
the purview of the consumer disputes redressal agencies”.
It could thus be seen that the legislature noticed
the mischief, that though Section 2(1)(d)(i) of the said Act kept out of its
purview the goods purchased for commercial purpose, the said restriction was
not found in Section 2(1)(d)(ii) of the said Act. As such, in order to bring
Section 2(1)(d)(ii) at par with Section 2(1)(d)(i), the following amendment was
effected to in clause (d):
“(c) in clause (d), (i) in sub
clause (ii), the following words shall be inserted at the end, namely: “but
does not include a person who avails of such services for any commercial
purpose”;
The following Explanation was substituted, namely:
‘Explanation.—For the purposes of this clause,
“commercial purpose” does not include use by a person of goods bought and used
by him and services availed by him exclusively for the purposes of earning his
livelihood by means of self-employment’;”
By virtue of the 2002 Amendment Act, the
legislature clearly provided that a person, who avails of such services for any
commercial purpose would be beyond the ambit of definition of the term
‘consumer’.
The Explanation, which is an exception to an
exception, which earlier excluded a person from the term ‘commercial purpose’,
if goods were purchased by such a person for the purposes of earning his
livelihood by means of self-employment, was substituted and the Explanation was
made applicable to both clauses (i) and (ii). It can thus clearly be seen that
by the 2002 Amendment Act, though the legislature provided that whenever a
person avails of services for commercial purposes, he would not be a consumer;
it further clarified that the ‘commercial purpose’ does not include use by a
person of goods bought and used by him and services availed by him exclusively
for the purposes of earning his livelihood by means of self employment.
What is therefore conspicuously evident is that the
legislature’s clearly intended that if a person buys goods for commercial
purpose or avails services for commercial purpose, ordinarily, he would have
been out of the ambit of the term ‘consumer’, by virtue of Explanation, which
is now common to both Sections 2(1)(d)(i) and 2(1)(d)(ii), he would, however, still come within the ambit of the term
‘consumer’, if purchase of such goods or availing of such services was
exclusively for the purposes of earning his livelihood by means of
self-employment.
LAW ON THE ASPECT
(1)
Lilavati Kirtilal Mehta Medical Trust vs.
Unique Shanti Developers and others, (2020) 2 SCC 265;
(2)
Paramount Digital Colour Lab and
others vs. AGFA India Private Limited and others, (2018) 14 SCC 81;
(3)
Sunil Kohli and another vs. Purearth
Infrastructure Limited, (2020) 12 SCC 235; (
(4)
CBI, AHD, Patna vs. Braj Bhushan Prasad and
others, (2001) 9 SCC 432.
(5)
Laxmi
Engineering Works vs. P.S.G. Industrial Institute, (1995) 3 SCC 583
(6)
Cheema
Engineering Services vs. Rajan Singh, (1997) 1 SCC 131
(7)
Kalpavruksha
Charitable Trust vs. Toshniwal Brothers (Bombay) Pvt. Ltd. and another, (2000)
1 SCC 512
(8)
SHRIKANT
G. MANTRI VERSUS PUNJAB NATIONAL BANK1
2022 LiveLaw (SC) 197 CIVIL APPEAL NO.11397 OF 2016; FEBRUARY 22,
2022
The Consumer Protection Act is a special statute and
is enacted with the purpose of providing a speedy and simple redressal to
consumer disputes. It provides a summary procedure so that the consumer
disputes are settled without undue delay. If the definition of the word
‘consumer’ is expanded, so as to include in it a person who avails of such
services for any commercial purpose, the very purpose of the said Act would be
defeated. No commercial dispute between the service provider and the
availer/recipient of the service could be included in the definition of the
word ‘consumer’ as in that event this will open floodgates of complaints.
The purpose of the said Act has been succinctly
described by Supreme Court in the case of Laxmi Engineering Works vs. P.S.G.
Industrial Institute, (1995) 3 SCC 583 which is as under:
“10. A review of the provisions of the Act
discloses that the quasi-judicial bodies/authorities/ agencies created by the
Act known as District Forums, State Commissions and the National Commission are
not courts though invested with some of the powers of a civil court. They are quasi-judicial
tribunals brought into existence to render inexpensive and speedy remedies to
consumers. It is equally clear that these forums/ commissions were not supposed
to supplant but supplement the existing judicial system. The idea was to
provide an additional forum providing inexpensive and speedy resolution of
disputes arising between consumers and suppliers of goods and services. The
forum so created is uninhibited by the requirement of court fee or the formal
procedures of a court. Any consumer can go and file a complaint. Complaint need
not necessarily be filed by the complainant himself; any recognized consumers'
association can espouse his cause. Where a large number of consumers have a
similar complaint, one or more can file a complaint on behalf of all. Even the
Central Government and State Governments can act on his/their behalf. The idea
was to help the consumers get justice and fair treatment in the matter of goods
and services purchased and availed by them in a market dominated by large trading
and manufacturing bodies. Indeed, the entire Act revolves round the consumer
and is designed to protect his interest. The Act provides for
“business-to-consumer” disputes and not for “business-to business” disputes.
This scheme of the Act, in our opinion, is relevant to and helps in
interpreting the words that fall for consideration in this appeal.”
The object of the
amendment, therefore, was to help the consumers get justice and fair treatment
in the matter of goods and services purchased and availed by them in a market
dominated by large trading and manufacturing bodies. It has been held that the
entire Act revolves round the consumer and is designed to protect his interest.
It provides for “business-to-consumer” disputes and not for “business-to-business”
disputes. It has been held that forums/commissions provided by the said Act are
not supposed to supplant but supplement the existing judicial system. The idea
was to provide an additional forum providing inexpensive and speedy resolution
of disputes arising between consumers and suppliers of goods and services. In the case of Laxmi Engineering Works (supra), the Supreme Court, while
considering the scope of the definition of the expression ‘consumer’ with
relation to Section 2(1)(d)(i) of the said Act and the Explanation added by
1993 Amendment Act, observed thus:
“11. Now coming back to the definition of the expression ‘consumer’ in Section 2(d), a consumer means insofar as is relevant for the purpose of this appeal, (i) a person who buys any goods for consideration; it is immaterial whether the consideration is paid or promised, or partly paid and partly promised, or whether the payment of consideration is deferred; (ii) a person who uses such goods with the approval of the person who buys such goods for consideration; (iii) but does not include a person who buys such goods for resale or for any commercial purpose. The expression ‘resale’ is clear enough. Controversy has, however, arisen with respect to meaning of the expression “commercial purpose”. It is also not defined in the Act. In the absence of a definition, we have to go by its ordinary meaning. ‘Commercial’ denotes “pertaining to commerce” (Chamber's Twentieth Century Dictionary); it means “connected with, or engaged in commerce; mercantile; 11 having profit as the main aim” (Collins English Dictionary) whereas the word ‘commerce’ means “financial transactions especially buying and selling of merchandise, on a large scale” (Concise Oxford Dictionary). The National Commission appears to have been taking a consistent view that where a person purchases goods “with a view to using such goods for carrying on any activity on a large scale for the purpose of earning profit” he will not be a ‘consumer’ within the meaning of Section 2(d)(i) of the Act. Broadly affirming the said view and more particularly with a view to obviate any confusion — the expression “large scale” is not a very precise expression — Parliament stepped in and added the explanation to Section 2(d)(i) by Ordinance/ Amendment Act, 1993. The explanation excludes certain purposes from the purview of the expression “commercial purpose” — a case of exception to an exception. Let us elaborate: a person who buys a typewriter or a car and uses them for his personal use is certainly a consumer but a person who buys a typewriter or a car for typing others' work for consideration or for plying the car as a taxi can be said to be using the typewriter/car for a commercial purpose. The explanation however clarifies that in certain situations, purchase of goods for “commercial purpose” would not yet take the purchaser out of the definition of expression ‘consumer’. If the commercial use is by the purchaser himself for the purpose of earning his livelihood by means of self-employment, such purchaser of goods is yet a ‘consumer’. In the illustration given above, if the purchaser himself works on typewriter or plies the car as a taxi himself, he does not cease to be a consumer. In other words, if the buyer of goods uses them himself, i.e., by self-employment, for earning his livelihood, it would not be treated as a “commercial purpose” and he does not cease to be a consumer for the purposes of the Act. The explanation reduces the question, what is a “commercial purpose”, to a question of fact to be decided in the facts of each case. It is not the value of the goods that matters but the purpose to which the goods bought are put to. The several words employed in the explanation, viz., “uses them by himself”, “exclusively for the purpose of earning his livelihood” and “by means of self-employment” make the intention of Parliament abundantly clear, that the goods bought must be used by the buyer himself, by employing himself for earning his livelihood”.
In the case of Cheema
Engineering Services vs. Rajan Singh, (1997) 1 SCC 131 the Supreme
Court held that the manufacture and sale of bricks in a commercial way may also
be to earn livelihood. As such, the question as to whether the complainant used
the machinery for the manufacture of bricks alone or with members of his family
and as to whether the same was for earning his livelihood, were the questions
of fact to be decided on the basis of evidence.
In the case of Kalpavruksha
Charitable Trust vs. Toshniwal Brothers (Bombay) Pvt. Ltd. and another, (2000)
1 SCC 512 this Court considered the question as to whether the machines
purchased by the Charitable Trust for use in the Diagnostic Centre were meant
for ‘commercial purpose’ or not. It was sought to be urged on behalf of the
Trust that the T rust was not carrying out a profit making activity and as
such, the purchase of diagnostic machines would not come within the ambit of
the term ‘commercial purpose’. It was, therefore, sought to be urged that it
would fall within the definition of the term ‘consumer’. This Court held that
the finding of the National Commission that the machinery was installed for
commercial purpose and as such, the Trust was not a ‘consumer’ within the
meaning of the said Act, required no interference.
In the case of Paramount
Digital Colour Lab (supra), the Supreme Court was considering the case
of unemployed graduates, who had started a business of photography in
partnership for self-employment and for their livelihood. For the said purpose,
they had purchased an advanced photo processing, developing and printing
machine. It was the case of the appellants therein that the respondents,
despite having the knowledge that the machine was not working properly, had
unfairly and carelessly sold the same to the appellants. As such, the
appellants were required to file a complaint under the said Act. The State
Commission had allowed the complaint. In appeal, the National Commission held
that the appellants were not the consumers as envisaged under Section 2(1)(d)
of the said Act, since the purchase of the machine was for commercial purpose.
Reversing the view taken by the National Commission and upholding the view
taken by the State Commission, the Supreme Court observed thus:
“ In
this case, since the appellants have purchased the machine, Section 2(1)(d) of
the Act is applicable. “Consumer” as defined under Section 2(1)(d) of the Act
does not include a person who obtains goods for a “commercial purpose”. The
Explanation supplied to Section 2(1)(d) clarifies that “commercial purpose”
does not include use by a person of goods bought and used by him and services
availed by him exclusively for the purposes of earning his livelihood by means
of “self-employment”. If both these provisions are read together, it leads to
the conclusion that if a person purchased the goods for consideration not for
any commercial purpose, but exclusively for the purposes of earning his
livelihood by means of “self-employment”, such purchaser will come within the
definition of “consumer”. If a person purchases the goods for a “commercial
purpose” and not for the purposes of earning his livelihood by means of
“self-employment”, such purchaser will not come within the definition of
“consumer”. It is therefore clear, that despite “commercial activity”, whether
a person would fall within the definition of “consumer” or not would be a
question of fact in every case. Such question of fact ought to be decided in
the facts and circumstances of each case”.
“Self-employment” necessarily includes earning
for self. Without earning generally there cannot be “self-employment”. Thus, if
a person buys and uses the machine exclusively for the purposes of earning his
livelihood by means of “self-employment”, he definitely comes within the
definition of “consumer”. In the matter on hand, the quality of ultimate
production by the user of the machine would depend upon the skill of the person
who uses the machine. In case of exigencies, if a person trains another person
to operate the machine so as to produce the final product based on skill and
effort in the matter of photography and development, the same cannot take such
person out of the definition of “consumer”.”
In the case of Lilavati
Kirtilal Mehta Medical Trust (supra), the Supreme Court after considering
the earlier judgments held thus:
To summarise from the above
discussion, though a strait jacket formula cannot be adopted in every case, the
following broad principles can be culled out for determining whether an
activity or transaction is “for a commercial purpose”:
(1) The question of whether a transaction is for a commercial purpose would depend upon the facts and circumstances of each case. However, ordinarily, “commercial purpose” is understood to include manufacturing/ industrial activity or business-to-business transactions between commercial entities.
(2) The purchase of the good or service should have a close and direct nexus with a profit generating activity.
(3) The identity of the person making the purchase or the value of the transaction is not conclusive to the question of whether it is for a commercial purpose. It has to be seen whether the dominant intention or dominant purpose for the transaction was to facilitate some kind of profit generation for the purchaser and/or their beneficiary.
(4) If it is found that the dominant purpose behind purchasing the good or service was for the personal use and consumption of the purchaser and/or their beneficiary, or is otherwise not linked to any commercial activity, the question of whether such a purchase was for the purpose of “generating livelihood by means of self-employment” need not be looked into.”
It is thus clear,
that the Supreme Court has held that the question, as to whether a transaction
is for a commercial purpose would depend upon the facts and circumstances of
each case. However, ordinarily, “commercial purpose” is understood to include
manufacturing / industrial activity or business-to-business transactions
between commercial entities; that the purchase of the good or service should
have a close and direct nexus with a profit-generating activity; that the
identity of the person making the purchase or the value of the transaction is
not conclusive for determining the question as to whether it is for a
commercial purpose or not? What is relevant is the dominant intention or
dominant purpose for the transaction and as to whether the same was to
facilitate some kind of profit generation for the purchaser and/or their
beneficiary. It has further been held that if the dominant purpose behind
purchasing the good or service was for the personal use and the consumption of
the purchaser and/or their beneficiary, or is otherwise not linked to any
commercial activity, then the question of whether such a purchase was for the
purpose of “generating livelihood by means of self-employment” need not be
looked into.
In the case of Sunil
Kohli (supra), the Supreme Court
on the basis of the evidence, clearly found that the complainants wanted to
dispose of property in Denmark and wanted to come down to Delhi to start a
business. It has further been found that for this purpose, the premises in
question were booked. As such, said case was a case wherein the commercial
premises were booked by the appellants therein, who had left their employment
in Denmark and purchased the premises only for the purposes of starting their
business for earning their livelihood by way of self-employment. Therefore, the
said case was a case wherein the appellants therein had availed of the services
exclusively for earning their livelihood by means of self-employment.
In the above
backdrop, the Supreme Court recently had occasion to deal with the issue in 1
2022 LiveLaw (SC) 197 CIVIL
APPEAL NO.11397 OF 2016 (judgment delivered on FEBRUARY 22, 2022) in a matter captioned as SHRIKANT G. MANTRI VERSUS PUNJAB NATIONAL BANK , the Supreme Court
has held that it is not in dispute that the appellant was already engaged in
the profession of stockbroker, much before he availed of service of the
overdraft facility from the respondent-Bank. It is also not in dispute that he
was also acting as a stockbroker for the respondent-Bank. It is also not in
dispute that the appellant took the overdraft facility and also sought
enhancement of the same from time to time in furtherance of his business as a
stockbroker and for the purpose of enhancing the profits therein. As already
held by the Supreme Court in the case of Laxmi Engineering Works (supra), the
terms “services availed by him”, “exclusively for the purpose of earning his
livelihood” and “by means of self-employment” will have to be given its
meaning, as intended by the legislature. The said terms will have to be
construed in context with the purpose for which the said Act is enacted.
The legislative history as to how
Section 2(1)(d) of the said Act has come in its present form from the original
form stands described. The amendments incorporated by the 1993 Amendment Act as
well as by the 2002 Amendment Act would clearly show that the legislative
intent is to keep the commercial transactions out of the purview of the said
Act and at the same time, to give benefit of the said Act to a person who
enters into such commercial transactions, when he uses such goods or avails
such services exclusively for the purposes of earning his livelihood by means
of self-employment. In the above case, the National Commission has come to a
finding that the appellant had opened an account with the respondent-Bank, took
overdraft facility to expand his business profits, and subsequently from time
to time the overdraft facility was enhanced so as to further expand his
business and increase his profits. The relations between the appellant and the
respondent was purely “business to business” relationship. As such, the
transactions would clearly come within the ambit of ‘commercial purpose’. It cannot
be said that the services were availed “exclusively for the purposes of earning
his livelihood.
No doubt, in Internet and Mobile Association of India vs.
Reserve Bank of India, (2020) 10 SCC 274 it is held that the services
of the Bank provide lifeline for any business, trade or profession. It is also
obvious that without involvement of bank there could be any worthwhile work.
However, the ‘business to business’ relationship cannot be construed as
consumer disputes, thereby defeating the very purpose of providing speedy and
simple redressal to consumer disputes. The appellant was therefore held to be
raising a commercial dispute and that is clearly excluded under the Consumer
Protection Act and no consumer complaint shall lie.
REMARK
It could thus be seen, that when
a person avails a service for a commercial purpose, to come within the meaning
of ‘consumer’ as defined in the said Act, he will have to establish that the
services were availed exclusively for the purposes of earning his livelihood by
means of self-employment. There cannot be any straitjacket formula and such a
question will have to be decided in the facts of each case, depending upon the
evidence placed on record.
The aforesaid dicta clearly encapsulates
that a clear commercial transaction for profit generating purpose may ex facie
be treated as commercial dispute and as such the Consumer Commissions cannot be
approached for redressal, though, civil action may lie. However, any
transaction for the livelihood, though, may have a trap of commercial
transaction, but if the same is for perusal livelihood, it cannot be treated as
commercial purpose and therefore, within the meaning of section 2(1)(d)(ii) and
as per the explanation, the person, who availed of goods and services shall be
treated as consumer and therefore Consumer complaint in this regard before the appropriate
Consumer Commission shall lie.
Anil
K Khaware
Founder & Senior Associate
Societylawandjustice.com
No comments:
Post a Comment