WHAT IS COMMERCIAL PURPOSE AS DEFINED IN CONSUMER PROTECTION ACT

After amendment 2002 in the consumer protection Act 1986 , suddenly all the doors for commercial units were closed and they were barred from going  to consumer forums for their redressal .But National Commission in 2004 vide order dated 3.12.04  clarified number of doubts  on the issue of definition of consumer in its  elaborated judgment pronounced by Justice M B Shah taking up two appeals together namely M/S Harsolia Motors Vs M/S National Insurance co. Ltd ,M/S Diwakar Goiram Porkhayat Vs m/s national Insurance Co. Ltd and also in M/S Tractor House Vs./S National Insurance Co. Ltd .This judgment referred to earlier decided cases by the apex court wherein the meaning of commercial purpose was explained as back as 1995 in case of Luxmi engineering works Vs PSG Institute[1995]3 SCC 585.and lately in New Delhi municipal corporation vs. Sohan lal Sachdeva[2002] 2 SCC 494 wherein commerce and commercial purpose is defined and distinguished

The basic question for adjudication was whether insurance policy taken by commercial units could be held to be hiring of services for commercial purpose and thereby excluded from the preview of the Consumer Protection Act.The words for explanation before the commission were commercial purpose, commerce, services, and mainly services of insurance hired, taken ,availed by the insurer. Crux of the whole discussion in this order is explained in the following manner:

                                             1 Taking insurance policy by an individual is a service under the act.

                                              2 Taking insurance policy by a commercial unit running its business is a service as far as it is limited to indemnification of the actual loss suffered by the insurer under the act but cannot be considered service taken if taken license and registered for doing business of insurance.

                                             For coming to this conclusion, commission has gone far ahead in explaining as to how in  one situation services hired or availed is a service for commercial purpose and in other situation not commercial purpose by giving reference to earlier decided case of Luxmi Engineering Works Ltd in 1995.  And it has been emphasized-  

 

·         If a typewriter is used for typing by the person for himself and a car purchased for his own driving for self employment – it is not for commercial purpose but if a typewriter is purchased and is being used for other person for giving typing services to others for profit or loss by a commercial unit it is a commercial purpose.

·         Similarly a car driven as taxi by employees of commercial unit for giving transport services is a commercial purpose but car used by an officer of the unit for his own use is not a commercial purpose

The issue had again come up before the National Commission due to varied interpretations in two cases. Noticing an apparent conflict in the decisions rendered by National  Commission in two cases namely Controls and Switchgear Company Ltd.& others  V/S  Daimler Chrysler India Pvt. Ltd. and T and T Motors Ltd. IV (2007) CPJ 1 (NC) & others decided on 07.02.2013, both rendered by Benches comprising two Members, now Consumer Case No. 51 of 2006. D/d. 8.7.2016 had came up before larger bench comprising three judges Mr. Justice D.K. Jain, President, Mr. Justice V.K. Jain and Dr. B.C. Gupta,

In Controls and Switchgear Company Ltd. (supra), a complaint alleging defects in two Mercedes Benz, cars purchased by the complainant company for the use of its directors, was filed before this Commission. The complaint was resisted inter-alia on the ground that the cars were purchased for a commercial purpose. Rejecting the contention, this Commission inter-alia held as under:

“The cars are purchased for the use of the Directors and are not to be used for any activity directly connected with commercial purpose of earning profit. Cars are not used for hire but are for the personal use of the Directors. Hence, it cannot be said that the complainant company has purchased the cars for commercial purpose.”

An appeal against the above-referred decision is pending before the Hon’ble Supreme Court.

In General Motors Pvt. Ltd. (supra), a complaint alleging defect in a car purchased by the complainant company for use of its Managing Director was filed before the concerned State Commission. The complaint was resisted inter-alia on the ground that purchase of the vehicle for the use of the Managing Director of the company amounted to purchase for a commercial purpose. Accepting the said contention, this Commission inter-alia held as under

“We agree with Appellants’ contention that this clearly amounts to its purchase for a ‘commercial purpose’ since the Managing Director of a private limited company would obviously not use this vehicle for self-employment to earn his livelihood but for ‘commercial purposes’ as a perk of his office.”

The above two judgments led to controversy and now National commission further clarified the concept of commercial purpose referring to supreme court judgments through this Consumer Case No. 51 of 2006. Crompton Greaves Limited& others  V/S … Daimler Chrysler India Private Limited &others D/d. 8.7.2016  by three judges:- Mr. Justice D.K. Jain, President, Mr. Justice V.K. Jain and Dr. B.C. Gupta, Members (larger ) bench  in the following manner-

As observed by the Hon’ble Supreme Court in Laxmi Engineering Works (supra), it is not the value of the goods but the purpose for which the goods are brought or put to use, which is relevant to decide whether the goods were obtained for a commercial purpose or not. The same would be the position, where services are hired or availed by a company. If the business activities of a company cannot be conveniently undertaken without the goods purchased or the services hired or availed by a company, such purchase or hiring/availing as the case may be, would be for a commercial purpose, because the objective behind such purchase of goods or hiring or availing of the services would be to enable the company to earn profits by undertaking and advancing its business activities.

The goods and services made available by a company to its directors or employees can be classified into the following three broad categories:-

(a) The goods and services which are obtained for and made available to the directors or employees of the company and are used by them only for their personal purposes, unconnected with the business of the company. For instance, the cars used by the directors and employees of the company for their shopping, outings, recreations, etc. or for commuting to and from the office of the company. Another example can be the air conditioners and furniture provided at the residence of the directors and employees of the company or the telephone or broadband got installed by the company at their residence. This does not amount to commercial purpose because the purpose is to make certain facilities and amenities available to the directors and employees of the company as a part of the incentive offered to them by the company, as a reward or remuneration for the work which they are expected to perform for the company

(b) The goods and services made available to the directors or employees of the company and used by them primarily for their personal purposes but incidentally, also for the purposes of the company. For instance, a car used mainly for outings, recreations, personal commuting etc. of the directors and employees or their families, but also for visiting the factory and offices of the company or attending the business meetings. This also does not amount to commercial purpose

(c) The goods and services made available by a company to its directors and employees primarily for the purposes of the company and used by them mainly for the purposes of the company but incidentally also for their personal purposes. For instance, a vehicle purchased for being used as a staff car or a delivery van, but sometimes also used for the personal purposes of the directors or employees, unrelated to the business of the company. This manner vehicle is used for commercial purpose because of direct nexus with the business.

It is ample clear now that in cases of company filing complaint as consumer, facts and circumstances are the important factor; merely ‘for the use of director of the company’ is not a sufficient ground for declaring commercial purpose 

 

Dr Prem Lata

 

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