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JUSTICE
V.K. JAIN, MEMBER
Noticing an apparent conflict
in the decisions rendered by this Commission in Controls and
Switchgear Company Ltd. Vs. Daimler Chrysler India Pvt. Ltd. and T and T Motors
Ltd. IV (2007) CPJ 1 (NC) and General Motors Pvt. Ltd. Vs. G.S.
Fertilizers Pvt. Ltd. [First Appeal No. 723 of 2006] decided on
07.02.2013, both rendered by Benches comprising two Members, the
following issue was referred to this larger Bench, for decision:-
- Whether the purchase of a
car or any other goods by a company for the use/personal use of its
Director amounts to purchase for a commercial purpose, within the
meaning of Section 2(1)(d) of the Consumer Protection Act, or not.
2.
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:
In our view, there is no substance in the aforesaid contention,
because:
- Company is a legal entity
and is entitled to file complaint;
- 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 note that in his complaint before the State
Commission the Respondent-Complainant had clearly stated that the vehicle
was purchased for the use of its Managing Director. 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. Counsel
for the Respondent-Complainant has sought to challenge this contention by
pointing out that since the present case pertains to 1999 and the
amendment referred to was made only in 2002, it was not applicable in the
instant case. We are unable to agree with this contention as well
because the 2002 Amendment to the Act pertains to Section 2(1)(d)(ii) of
the Act relating to hiring or availing of services for a
consideration and not to Section 2(1)(d)(i) of the Act which relates to
purchase of goods. In fact, the interpretation of Section
2(1)(d)(i) of the Act relating inter alia to purchase of goods has been
well settled by the Hon’ble Supreme Court as far back as in 1995 in its
judgment in Laxmi Engineering Works v. P.S.G. Industrial Institute
[1995 (3) SCC 583], wherein the Hon’ble Apex Court has ruled as
follows:
“… On this interpretation of the definition clause,
persons buying goods either for resale or for use in large scale
profit-making activity will not be ‘consumers’ entitled to protection
under the Act. It seems to us clear that the intention of
Parliament as can be gathered from the definition section is to deny the
benefits of the Act to persons purchasing goods either for purpose of
resale or for the purpose of being used in profit-making activity engaged
on a large scale. It would thus follow that cases of purchase of
goods for consumption or use in the manufacture of goods or commodities
on a large scale with a view to make profit will all fall outside the
scope of the definition. It is obvious that Parliament intended to
restrict the benefits of the Act to ordinary consumers purchasing goods
either for their own consumption or even for use in some small venture
which they may have embarked upon in order to make a living as distinct
from large-scale manufacturing or processing activity carried on for
profit. In order that exclusion clause should apply it is however
necessary that there should be a close nexus between the transaction of
purchase of goods and the large-scale activity carried on for earning
profit.”
Since the instant case pertains to the purchase of goods
admittedly for ‘commercial purposes’ since the vehicle was purchased by a
private limited company for its Managing Director, this case is squarely
covered by the above judgment of the Hon’ble Apex Court. The State
Commission erred in not taking note of this important fact while deciding
the complaint.”
3.
Section 2(1)(d) of the Consumer Protection Act which defines the term
‘consumer’, to the extent it is relevant, reads as under:-
"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 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 purposes;
It would thus be seen that the
emphasis is on the purpose for which the goods are obtained, though the
use to which the goods are actually put would be helpful in deciding the
purpose for which they were obtained.
4.
The term ‘commercial purpose’ has not been defined in the Consumer
Protection Act and as held in Laxmi Engineering Works v. P.S.G.
Industrial Institute [(1995) 3 SCC 583], in the absence of a
statutory 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, having profit as the main aim” (Collin’s English Dictionary)
and the word ‘commerce’ means “financial transactions, especially buying
and selling of merchandise on a large scale” (Concise Oxford
Dictionary)”.
4.
Going by the dictionary meaning, a car or for that matter any goods
obtained and the services hired or availed by a company can be said to
have been obtained or hired or availed for a commercial purpose,
only if the said goods or services are intrinsically connected with, or
related to the business or commerce in which the company is engaged. The
acquisition of the goods or the hiring or availing of services, in order
to bring the transaction within the purview of section 2 (1) (d) of the
Consumer Protection Act, therefore, should be aimed at generating profits
for the company or should otherwise be connected or interwoven with the
business activities of the company. The purpose behind such acquisition
should be to promote, advance or augment the business activities of the
company, by the use of such goods or services. 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.
5.
If a car or other goods are purchased or the services are hired or
availed by a company for the personal use of its directors or employees,
the purpose behind such acquisition is not to earn profits or to advance
the business activities of the company. 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. It is not as if a company cannot run its business
without providing such facilities and amenities to its directors and
employees. It is not necessary for the business of the company, to provide
such facilities and amenities to its directors and employees. Providing
such facilities and amenities only motivates them to perform their work
in an efficient and congenial environment, besides serving as an
incentive aimed at eliciting better performance. The company does
not earn profit merely by making a car or certain other goods or services
available to its directors and employees. Therefore, it would be
difficult to say that such goods are purchased or the services are hired
or availed by the company for a commercial purpose.
6.
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.
(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.
(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.
7.
As far as the goods and services falling in category (a) are concerned,
there can be no dispute that since such goods were purchased or the
services were hired or availed by the company and made available to its
directors and employees for the purposes wholly unrelated to the business
activities of the company, such an acquisition cannot be said to be for a
commercial purpose. No commercial purpose of the company is achieved by
purchasing such goods or hiring or availing such services and then making
them available to its directors and employees.
8.
In our opinion even if such goods or services are incidentally used by
the directors or employees of the company for the purposes of the
company, that would not lead to the conclusion that the acquisition of
such goods or services was for a commercial purpose. The dominant purpose
behind such acquisition being to provide an amenity to the directors or
the employees as the case may be, it cannot be said that the company was
seeking to make a profit or advance its business by such an
acquisition. The use for the purposes of the company being
subsidiary and incidental in nature, cannot override the dominant purpose
for which they were acquired and made available to the director or the
employee of the company. Therefore, the acquisition of goods and
services, even if they fall under category (b) above, cannot be said to
be for a commercial purpose.
9.
As far as the goods or services falling in category (c) are concerned,
since the dominant purpose behind such acquisition is to advance and
sustain the business activities of the company and the use for the
personal purposes of the directors or the employees being incidental, it
can be safely said that such an acquisition was for the commercial
purposes of the company.
10. In Laxmi
Engineering Works (supra), the Hon’ble Supreme Court inter-alia
observed as under:-
“…On this interpretation of the definition clause,
persons buying goods either for resale or for use in large scale
profit-activity will not be 'consumers' entitled to protection under the
Act. It seems to us clear that the intention of Parliament as can be
gathered from the definition section is to deny 446 the benefits of the
Act to persons purchasing goods either for purpose of resale or for the
purpose of being used in profit making activity engaged on a large scale.
It would thus follow that cases of purchase of goods for consumption or
use in the manufacture of goods or commodities on a large scale with a
view to make profit %ill all fall outside the scope of the definition. It
is obvious that Parliament intended to restrict the benefits of the Act
to ordinary consumers purchasing goods either for their own consumption
or even for use in some small venture which they may have embarked upon
in order to make a living as distinct from large scale manufacturing or
processing activity carried on for profit. In order that exclusion clause
should apply it is however necessary that there should be a close nexus
between the transaction of purchase of goods and the large scale activity
carried on for earning profit. "
Relying upon the
above-referred observations, it was contended by the learned counsel for
the opposite party that the purpose behind enactment of Consumer
Protection Act was to provide a speedy remedy to the small consumers and
the Act is not intended for the benefit of large business entities such
as corporates. We, however, find nothing in the judgment which
would indicate that a company will not be a consumer within the meaning
of the Act even if the goods are obtained or the services are hired or
availed by it, for a purpose which by no means, can be said to be a commercial
purpose. The Apex Court itself emphasised that for the exclusion to
apply, there has to be a close nexus between the transaction of purchase
of goods and the large scale activity, carried for earning profit.
Therefore, if a transaction of purchase of goods or hiring or availing of
services is not aimed at earning profits or advancing the business
activities of the purchaser, such a transaction will not be out of the
purview of the Consumer Protection Act.
The learned counsel for the opposite party relying upon the decision of a
two Members Bench of this Commission in Duggirala Prasad Babu Vs.
M/s Skoda Auto India Pvt. Ltd. [Revision Petition No.428 of 2013]
decided on 4.3.2014, contended that since depreciation is claimed by the
company on the car purchased for its director, such a purchase
would be for a commercial purpose. We, however, find no merit in the
submission. Whether a company or for that matter any other purchaser is
entitled in law to claim depreciation in respect of a car or other goods
purchased primarily for the personal purposes of its directors or
employees is not a question to be considered by this Commission. What
this Commission has to see is the purpose behind purchase of the goods or
hiring or availing the services as the case may be and if depreciation is
found to be wrongly claimed, it would be for the concerned department to
take note of such a tax evasion. Therefore, we are not in agreement with
the view taken in the above-referred decision.
The learned counsel for the opposite party referred to the decision of
the Hon’ble Supreme Court in Chairman, Thiruvalluvar Transport
Corporation Vs. Consumer Protection Council [Civil Appeal No.7142 of
1993] decided on 9.2.1995, where the Hon’ble Supreme Court was
concerned with the question as to whether this Commission has
jurisdiction to adjudicate upon a claim for compensation arising out of a
motor vehicle accident or not. The above-referred decision has absolutely
no application to the issue involved in this complaint and, therefore,
reliance upon the said decision is wholly misplaced.
The learned counsel for the opposite party also relied upon the decision
of this Commission in Interfreight Services Pvt. Ltd. Vs. Usha
International 1(1995) CPJ 128 (NC), where this Commission
inter-alia observed that the special remedy before the consumer forums
can be invoked only by ordinary consumers, purchasing goods for their
private and personal use and consumption and not by business organization
buying goods for commercial purposes. There is no quarrel with the legal
proposition that the provisions of the Consumer Protection Act are not
for the benefit of business organizations buying goods for commercial
purposes, but at the same time, such organisations are not ousted from
the purview of the said Act, where the goods bought or the services hired
or availed by them are not for commercial purposes.
11. For the
reasons stated hereinabove, the issue referred to the larger Bench is
answered as follows:-
(a) If a car or any other
goods are obtained or any services are hired or availed by a company for
the use/personal use of its directors or employees, such a transaction
does not amount to purchase of goods or hiring or availing of services
for a commercial purpose, irrespective of whether the goods or services
are used solely for the personal purposes of the directors or employees
of the company or they are used primarily for the use of the directors or
employees of the company and incidentally for the purposes of the
company.
(b) The purchase of a car or
any other goods or hiring or availing of services by a company for the
purposes of the company amount to purchase for a commercial purpose, even
if such a car or other goods or such services are incidentally used by
the directors or employees of the company for their personal purposes.
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