Company Purchasing Software To Enhance Efficiency & Profit Is Not A “Consumer” Within Consumer Protection Act: Supreme Court

The Supreme Court on Thursday (November 13) ruled that a person purchasing a product for a 'commercial purpose' having nexus with the generation of a profit can't be categorized as a consumer under the Consumer Protection Act 1986.A bench of Justices JB Pardiwala and Manoj Misra upheld the dismissal of the consumer complaint filed by the Appellant-software company against the Respondent-seller for selling a defective software license to be used by the Appellant for automation of its business processes. “In the instant case, not only the complainant is a commercial entity, the purchase of goods/ services (i.e., software) from the respondent was with a view to automate the processes of the company which were linked to generation of profit inasmuch as automation of business processes is undertaken not just for better management of the business but to reduce costs and maximise profits. Thus, in our view, the transaction of purchase of goods/ services (i.e., software) had a nexus with generation of profits and, therefore, qua that transaction the appellant cannot be considered a consumer as defined in Section 2(1)(d) of the 1986 Act.”, the court held. Test for determining whether the purchase of goods/services was for commercial activity or personal use. “What is to be seen is the dominant intention or dominant purpose for the transaction i.e. whether it is to facilitate some kind of profit generation for the purchaser(s) and/or its/ their beneficiary. If it is found that the dominant purpose behind purchasing goods or services is for personal use and consumption of the purchaser, or is otherwise not linked to any commercial activity, the question whether such purchase is for generating a livelihood by means of self-employment need not be looked into. However, where the transaction is for a commercial purpose then it might have to be considered whether it is for generating livelihood by means of self-employment or not.”, the court observed. The Court provided a critical explanation of why a self-employed individual may be a consumer, while a corporation in a similar transaction is not stating that “the goods purchased by a self-employed individual for self-use for generating livelihood would fall within the explanation even if activity of that person is to generate profits for the purpose of its livelihood. But where a company purchases a software for automating its processes, the object is to maximise profits and, therefore, it would not fall within the explanation of Section 2(1)(d) of the 1986 Act.” Applying the law, the Court held “the transaction of purchase of goods/ services (i.e., software) had a nexus with generation of profits and, therefore, qua that transaction the appellant cannot be considered a consumer as defined in Section 2(1)(d) of the 1986 Act." Accordingly, the appeal was dismissed. Cause Title: M/S POLY MEDICURE LTD. VERSUS M/S BRILLIO TECHNOLOGIES PVT. LTDCitation : 2025 LiveLaw (SC) 1102Click here to download the judgmentFor Petitioner(s) Mr. Shashank Garg, Adv. Mr. Divyakant Lahoti, AOR Ms. Kartik Lahoti, Adv. Ms. Praveena Bisht, Adv. Ms. Vindhya Mehra, Adv. Mr. Kumar Vinayakam Gupta, Adv. Ms. Mallika Luthra, Adv. Ms. Shreya Gokel, Adv. Ms. Nishtha Jain, Adv. For Respondent(s) Mr. Jayant Mehta, Sr. Adv. Mr. Ankur Sangal, Adv. Ms. Sucheta Roy, Adv. Mr. Raghu Vinayak Sinha, Adv. M/S. Khaitan & Co., AOR

Company Purchasing Software To Enhance Efficiency & Profit Is Not A “Consumer” Within Consumer Protection Act: Supreme Court

Yash Mittal

When purchase is for profit generation, Consumer Protection Act won't be applicable.

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