Individual Investment Is Not 'Commercial Transaction'; Investor Is Consumer Under Consumer Protection Act: Kerala High Court

The Kerala High Court recently clarified that when an individual invests in a company in his individual capacity, the same cannot be termed as a 'commercial transaction' and he would be treated as a consumer as per the meaning of Section 2(7) of the Consumer Protection Act, 2019.Justice Ziyad Rahman A.A. was considering a petition preferred by the Managing Director of Kosamattam Finance against the orders of the District and State Consumer Disputes Redressal Commissions.The petitioner is the opposite party in a consumer complaint preferred by the third respondent before the District Commission/2nd respondent. The complainant had alleged deficiency of service on the part of the petitioner, stating that the company had not paid interest on the Non-Convertible Debentures (NCD) purchased by him.The petitioner contested maintainability of the consumer complaint as NCDs do not constitute 'goods'. However, since the contention was not considered by the District Commission, he had approached the High Court, which directed the District Commission to consider the same. The District Commission did not comply with the same and passed final order, which again led to the petitioner approached the High Court. The High Court then set aside the order and directed the District Commission to pass orders on maintainability.This time, the District Commission considered maintainability and found the complaint to be maintainable since the transaction between the 3rd respondent and the company was in the nature of a 'service'. This was challenged in revision before the State Commission but the same was dismissed. Again, the petitioner approached the High Court challenging the orders.The Court looked into the definition of 'consumer' under Section 2(7) and that of 'service' under Section 2(42). It found that there is a wide scope is given to 'service' and that the only exclusion is service rendered free of charge.Relying on the Supreme Court decisions in Standard Chartered Bank Ltd. v. Dr. B.N. Raman (2007) and Vodafone Idea Cellular Ltd. v. Ajay Kumar Agarwal, the Court observed:“The definition of service as defined under section 2(42) of the Act was also referred to, where, Banking, Financing, Insurance, are also specifically included therein. The only exclusion is rendering of any service free of charge…going by the definition of the term 'Service' as per the provisions of the Consumer Protection Act, it is given a very wider meaning, and the same is in tune with the purpose for which the Consumer Protection Act, 2019, is enacted; to ensure the welfare of the consumer, as a class. Therefore, when the expression 'service', is specifically defined under the Act, by including the facilities in connection with Banking and financing, the same has to be given effect to, by extending a wider meaning possible, so as to include all possible transactions forming part of the instances referred to in the said provision.”After examining the nature of the transactions, the Court came to the conclusion that the same amounts to 'service'.The petitioner had also raised a contention that since the nature of the transaction is of 'commercial' nature, going by clause (ii) of Section 2(7), the 3rd respondent cannot be a consumer.Though the Court felt that this contention was not raised before the Commissions, it went on to address it anyway. It distinguished the Supreme Court decisions in.According to the Court, the Apex Court decisions relate to transactions done by an individua on behalf of commercial entities whereas in the present case, the investment was made in an individual capacity and therefore, the decisions do not apply.It further remarked:“in all the above referred cases, there are materials to indicate that the investments were intended for profit-making, as part of the activities, which were basically commercial in nature. However, in this case, as far as the investments made by the 3rd respondent are concerned, the same were in his individual capacity and there is no case for the petitioner that it was otherwise. When going through the explanation to Section 2(7) where, the expression “commercial purpose' has been explained, it is specifically provided that, the goods used by him exclusively for the purpose of earning his livelihood by means of self employment, has to be excluded and it would not come under the commercial purposes. Therefore the term “commercial purposes” as explained in the aforesaid clause, has to be understood with reference to the same.”Finding that the investments of the 3rd respondent had no connection to any commercial activity, the Court opined that it would not be a commercial transaction. It thus refused to interfere with the impugned orders.The Court dismissed the writ petition, leaving open all contentions except maintainability of the complaint. Since the petitioner had requested for keeping the proceedings before the District Commission in abeyance in order to challenge the present judgment, the Court...

Individual Investment Is Not 'Commercial Transaction'; Investor Is Consumer Under Consumer Protection Act: Kerala High Court

K. Salma Jennath

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