Consumer Protection – Jehangir B. Gai

Subject:    NEED TO DEFINE “COMMERCIAL PURPOSE” UNDER THE CONSUMER PROTECTION ACT

Backdrop:

            Even after completing its Silver Jubilee, there are still some grey area in the Consumer Protection Act. The instance, the term “commercial purpose” has not been defined under the Act, which leave it open to subject interpretation in different manners by different presiding officers, resulting in chaos and confusion.

Case Study 1: – [Harsolia Motors v/s National Insurance and other connected cases – Judgement dated 3.12.2004 ‑ (2005) CPJ 27 (NC)]

            In several disputes filed by business houses in respect of insurance claims, the insurance companies had contented that such disputes would not be maintainable in view of commercial services having been excluded from the purview of the CPA as per the 1993 amendment to the Act.

            The issue ultimately reached the National Commission, which observed that an insured who takes an insurance policy cannot trade or carry on any commercial activity with regard to the insurance policy taken by him. Hence hiring of services of an insurance company by a commercial establishment cannot be held to be a commercial purpose. The policy is taken for reimbursement or for indemnity for the loss which may be suffered due to various perils. There is no question of trading or carrying on commerce in insurance policies even though the insurance coverage may be taken for commercial activity. Since an insurance policy is taken for protecting the interest of the insured and not for making any profit or trading or carrying on commercial purpose, it was held that a consumer complaint would be maintainable.

            An analysis of this judgement would show that a distinction was drawn between commercial activity and commercial purpose. Disputes regarding commercial activities where there is no trading or profit generation were considered to be maintainable under the CPA.

Case Study 2: – [Interfreight Services Private Ltd. v/s Usha International & Anr. – Judgement dated 12.10.1994 – I (1995) CPJ 128 (NC)]

            Interfreight Services had purchased fans for its office. The dispute ultimately reached the National Commission, which held that the intention of Parliament in excluding goods for commercial purposes was to impose a restriction that the special remedy under the CPA could be invoked only by ordinary consumers purchasing goods for their private and personal use and not by business organizations. It was held that the purchase of fans was for commercial purpose and hence the complaint was not maintainable.

            This appears to be the most logical judgement, keeping in mind the aims and objectives of the CPA.

Case Study 3: – [Controls & Switchgear Co. Ltd. v/s Daimlerchrysler India Pvt. Ltd. & Anr – Judgement dated 17.9.2007 – IV (2007) CPJ 1 (NC)]

            In this case, two luxury cars were purchased by a public limited company for its directors. A consumer complaint regarding manufacturing defects was filed before the National Commission. The manufacturer claimed that the complaint was not maintainable, as the complainant could not be termed a consumer. It was argued that the cars were purchased by a corporate entity using the company’s financial resources and was also claiming depreciation on the vehicles. Rejecting these arguments, the National Commission observed that the cars are neither let out on hire nor used for other commercial purpose, but are being used by the directors. Since the cars are not being used for any activity directly connected with earning profit, it would not amount to a commercial purpose merely because the vehicles are purchased by a company. Hence it was held that the consumer complaint was maintainable.

            An analysis of this judgement shows that there must be a direct nexus between the item purchased and profit generation so as to fall within the ambit of “commercial purpose”; otherwise a consumer complaint would be maintainable.

Case Study 4: – [Evirox Protection Co. Pvt. Ltd. v/s Tata Motors & Anr. – Judgement dated 20.1.2012 (Maharashtra State Comm.]

            Here, a complaint was filed alleging that the car purchased by the company for its directors was defective. The State Commission dismissed the complaint on the ground that a consumer complaint was not maintainable since the car had been purchased by a company engaged in commercial activity. The fact that the car was for the use of its directors was held to be irrelevant.

Conclusion:

            The need of the hour is to ensure that the term “commercial purpose” is defined under the Consumer Protection Act to have uniformity in interpretation. Ideally, since the object of the Act is to provide speedy justice for consumer grievances, the remedy under the Act should be made available only to individual consumers, and not to business houses such as partnership firms and companies.

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