Consumer Protection Act,1986– Explanation to s.2(1)(d) – ’Commercial Purpose’ under – When an activity/transaction is not for said purpose – Agreements to sell executed for 29 flats in 1995– Appellant-Trust took possession of said flats, constructed by respondent no.1, for providing hostel facilities to nurses employed by the Hospital run by the appellant – However, the structure became dilapidated and the appellant vacated the flats in 2002 – Complaint filed by the appellant before the National Commission– Initially, dismissed as barred by limitation– In review, the order was recalled, however the Commission again dismissed the complaint on the ground that the appellant was not ‘consumer’ u/s.2(1)(d) as the said section excludes a person who obtains goods and services for ‘commercial purpose’ – On appeal, held: Explanation clause to s.2(1)(d) was added by way of Ordinance No.24 of 1993 (subsequently replaced by Amendment Act No.50 of 1993) –Said Amendment Act also added ‘housing construction’ to the definition of ‘service’ u/s.2(o) – In the present case, the appellant validly took the possession of the flats constructed by respondent no.1 and paid consideration and can therefore be said to have availed of its housing construction services– Explanation to s.2(1)(d) is clarificatory in nature and only re-affirms the definition of ‘consumer’ as it already exists – Ultimately, whether or not a person is consumer or whether an activity is meant for commercial purpose will depend upon the facts and circumstances of each case – It is not the identity of the person but the purpose for which the transaction is made which is relevant – Hence, private corporate bodies such as the appellant may engage the services of third parties for the purpose of providing perquisites to their employees – If in all such cases the third party service-provider disclaims liability on the ground that the hirer of the service is engaged in trade and commerce, it will open Pandora’s box wherein the employer as well as the employees will not have any remedy – Purchase of the good/service should have close and direct nexus with profit-generating activity – There is no direct nexus between the purchase of flats by the appellant trust and its profit generating activities – Further, applying the dominant purpose test, it cannot be said that the provision of such hostel facilities is integral to the appellant trust’s commercial activities– Purchase of flats by the appellant for providing hostel facilities to the nurses is not even remotely related to the object of earning profits or for any commercial use as envisaged u/s.2(1)(d) and hence, does not qualify as meant for ‘commercial purpose’ – Appellant is ‘consumer ’ u/s.2(1)(d) for the present transaction under consideration– Impugned judgment set aside – Appeal restored before the National Commission, who is to decide the matter expeditiously.
Allowing the appeal, the Court
HELD: 1.1 The purchase of flats by the Appellant for the purpose of providing hostel facilities to the hospital nurses does not qualify as meant for a ‘commercial purpose’. Though the term ‘commercial purpose’ as referred to under Section 2(1)(d) has nowhere been defined under the provisions of the Consumer Protection Act, 1986, Supreme Court has expounded upon it based on its lateral dictionary meaning in various decisions. It is true that the said decisions were rendered in the context of deciding whether the goods or services availed of in the facts of those cases were for a commercial purpose or exclusively for the purpose of self-employment. This does not mean, however, that in every case a negative test has to be adopted wherein any activity that does not fall within the ambit of ‘earning livelihood by means of self-employment’ would necessarily be for a commercial purpose. Respondent No.1’s argument is rejected in this regard. Explanation clause was added to Section 2(1)(d) by way of Ordinance No. 24 of 1993 (subsequently replaced by Amendment Act No. 50 of 1993). Amendment Act No. 50 of 1993 also added ‘housing construction’ to the definition of ‘service’ under Section 2(o) of the 1986 Act. In the present case, it is not denied that the Appellant has validly taken possession of the flats constructed by Respondent No. 1 and paid consideration for the same, and can therefore be said to have availed of its housing construction services. The Explanation clause to Section 2(1)(d) of the 1986 Act is only clarificatory in nature. Therefore the Explanation clause only re-affirms the definition of ‘consumer’ as it already exists. Ultimately, whether or not a person is a consumer or whether an activity is meant for a commercial purpose will depend upon the facts and circumstances of each case. It may be the case that a person who engages in commercial activities has purchased a good or availed of a service for their personal use and consumption, or for the personal use of a beneficiary, and such purchase is not linked to their ordinary profit-generating activities or for creation of self-employment. Such a person may still claim to be a ‘consumer.’ If there is any deficiency in service, the serviceprovider cannot claim that merely because the person availing of the service is a profit-generating entity, and because such transaction does not relate to generation of livelihood through self-employment, they do not fall under the definition of a ‘consumer.’ A commercial entity may also be a consumer depending upon the facts of the case. It is not the identity of the person but the purpose for which the transaction is made which is relevant. [Paras 3-5] [570-E-F; 571-F-G; 574-H; 575A-D-G]
1.2 Private corporate bodies such as the Appellant trust may engage the services of third parties for the purpose of providing perquisites to their employees. If the third party service-provider disclaims liability before consumer forums on the ground that the hirer of the service is engaged in trade and commerce, it will open a Pandora’s box wherein the employer as well as the employees will not have any remedy. This would defeat the object of providing a speedy remedy to consumers, as outlined in the provisions of the 1986 Act. Further, setting such a precedent may discourage employers from undertaking to provide any facilities for their employees. Hence, it is necessary to clarify that the provision of such services would not usually be included in the definition of ‘commercial purpose.’ Though a straight-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’: (i) 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. (ii) The purchase of the good or service should have a close and direct nexus with a profit-generating activity. (iii) 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. (iv) 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. Applying these principles to the facts of the present case, there is no direct nexus between the purchase of flats by the Appellant trust and its profit generating activities. The flats were not occupied for undertaking any medical/diagnostic facilities within the hospital but for accommodating the nurses employed by the hospital. Moreover, the flats were being provided to the nurses without any rent. Further, applying the dominant purpose test, it cannot be said that the provision of such hostel facilities is integral to the Appellant trust’s commercial activities. Hence the provision of hostel facilities to nurses so as to facilitate better medical care is a positive duty enjoined upon the hospital so as to maintain the beneficial effects of the curative care efforts undertaken by it. Such a duty exists irrespective of the surplus or turnover generated by the hospital, and hence is not even remotely related to the object of earning profits or for any commercial use as envisaged under Section 2(1)(d). Hence the Appellant trust is a ‘consumer’ under Section 2(1)(d) of the 1986 Act for the present transaction under consideration. The matter is remanded to the National Commission for consideration in accordance with law. The appeal is restored before the National Commission, and the impugned judgment is set aside, in the aforesaid terms. The parties are relegated to record their evidence before the National Commission, and the National Commission is requested to hear the matter on merits and decide the same expeditiously, at an early date. [Paras 6-9] [576B-H; 577-A-D; 578-A-E-G]
Kalpavruksha Charitable Trust v. Toshniwal Brothers (Bombay) Pvt. Ltd. (2000) 1 SCC 512 : [1999] 3 Suppl. SCR 619 – distinguished.
Spring Meadows Hospital v. Harjol Ahluwalia through K.S. Ahluwalia, I (1998) CPJ 1 (SC) ; Laxmi
Engineering Works v. P.S.G. Industrial Institute (1995)
3 SCC 583 : [1995] 3 SCR 174 ; Paramount Digital Colour Lab v. Agfa India Private Limited (2018) 14 SCC 81 – relied on.
Cheema Engineering Services v. Rajan Singh (1997)
1 SCC 131 : [1996] 8 Suppl. SCR 340 ; Synco Textiles Pvt. Ltd. v. Greaves Cotton and Company Limited (1991) 1 CPJ 499 – referred to.
As published in the Supreme Court Reports, Supreme Court of India. Text from the Indian Supreme Court Judgments open data set (Dattam Labs), CC BY 4.0.
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