The Supreme Court has made a significant ruling regarding the Consumer Protection Act 1986. It has stated that commercial enterprises are not automatically excluded from being considered as "consumers" under the Act. This means that they can raise consumer disputes in relation to any goods or services they have acquired, as long as they were not obtained for commercial purposes. In determining whether the goods or services were used for commercial purposes, the court will consider whether they had a direct connection with the enterprise's profit-generating activities.
The case before the Supreme Court involved the question of whether an insurance policy obtained by an insured constituted a service hired for commercial purposes, thereby excluding the insured from the definition of "consumer" under the Act. Section 2(1)(d) of the Act does not cover goods or services acquired for commercial purposes.
The Supreme Court, consisting of Justice Ajay Rastogi and Justice CT Ravikumar, has emphasized that whether an insured individual qualifies as a "consumer" under the Consumer Protection Act 1986 depends on whether the insurance service has a direct connection to their profit-generating activities. The dominant intention or purpose of the transaction for which the claim has been raised must also be considered. For instance, if a manufacturer purchases raw materials to produce goods, it would be considered a commercial purpose. However, if the manufacturer buys a refrigerator or air conditioner for their office, which has no direct link to profit generation, it would not be considered for commercial purposes.
The court provided this clarification in response to a case concerning the exclusion of an insured individual from the definition of "consumer" under the Act. The bench's ruling reaffirms the importance of determining the connection between the goods or services acquired and the enterprise's profit-generating activities when considering whether they qualify as consumers under the Act.
Background:
Harsolia Motors and Rakesh Narula And Co. had both purchased fire insurance policies worth Rs. 75,38,000 and Rs. 90 lakhs, respectively. However, during the 2002 Godhra riots, the insured goods were damaged by fire. While Rakesh Narula And Co. received a claim payout of Rs. 54,29,871, Harsolia Motors' claim was rejected by the National Insurance Co. Ltd. Both parties then filed complaints with the Gujarat State Commission Disputes Redressal Commission.
The Gujarat State Commission ruled that the insured individuals could not be considered "consumers" under Section 2(1)(d) of the Consumer Protection Act, 1986. The commission held that as they were running businesses from the premises to generate profits, their complaints were not maintainable under the Act.
However, on appeal, the National Consumer Dispute Redressal Commission reversed the ruling and held in favor of the insured parties. The commission determined that the insured individuals' complaints were maintainable under the Act, as their insurance policies were not obtained for commercial purposes. This decision provides clarity on the interpretation of the term "consumer" under the Act and ensures that non-commercial policies are also covered under its ambit.
The Consumer Protection Act, 1986 was enacted with the objective of protecting and empowering consumers, and promoting their participation in the market economy. The Act adopts a liberal construction in favor of the consumer, as it is a social benefit-oriented legislation.
The definitions of 'consumer', 'person', and 'service' are important in interpreting the Act. The definition of 'consumer' excludes the use of goods purchased exclusively for self-employment purposes. The definition of 'person' includes a firm, and the definition of 'service' includes banking and insurance.
The courts have held that even if a person is engaged in a commercial activity, they may still be considered a consumer if they purchase goods or avail services for personal use or consumption that is not linked to their ordinary profit generating activities. The landmark 2019 judgment in Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers and Others is a prime example. The court in this case ruled that providing hostels for nurses is not a commercial activity within the meaning of the Consumer Protection Act.
Overall, the Act seeks to provide consumers with a comprehensive legal framework for the protection of their rights and interests in the market.
In the present case, the Court emphasized the importance of determining whether the goods or services in question were purchased for resale or for commercial purposes, in order to decide whether the complainant qualifies as a ‘consumer’ under the Consumer Protection Act, 1986. The Court stated that there is no exclusion from the definition of ‘consumer’ for commercial enterprises or persons covered under the expression ‘person’ in Section 2(1)(m) of the Act. Thus, any person or firm falling under the scope of the definition of ‘consumer’ can invoke the jurisdiction of the Act.
The Court referred to the definition of ‘consumer’, ‘person’ and ‘service’ under the Act and noted that a firm, whether registered or not, can always invoke the jurisdiction of the Act if it falls within the scope of the definition of ‘consumer’ under Section 2(1)(d) of the Act. The Court further clarified that an insurance contract always indemnifies losses and the hiring of an insurance policy has no element of profit generation, but the question of whether the insured is a ‘consumer’ would depend on the specific transaction in relation to which the claim has been raised.
The Court also referred to previous judgments and stated that a person engaged in commercial activity may still be considered a ‘consumer’ if they purchase goods or avail services for personal use or consumption, which is not linked to their ordinary profit generating activities. The Court, therefore, sent the matter back to the State Commission to adjudicate the complaint of the insured, taking into account the principles laid down by the Court, and directed the Commission to do so expeditiously, within a period of one year.
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TAGS: Consumer Protection Act 1986 insurance commercial purpose consumer National Consumer Dispute Redressal Commission Gujarat State Commission Disputes Redressal Commission Godhra riots Harsolia Motors Rakesh Narula And Co. definition of consumer social benefit legislation.
