Consumer Protection Act | If Commercial Use Is By Purchasers Themselves For Earning Livelihood By Self-Employment, They'll Be 'Consumers' : Supreme Court

The Supreme Court has ruled that a person buying goods either for resale or for use in large-scale profit-making activity, will not be a ‘consumer’ entitled to protection of the Consumer Protection Act, 1986. However,  if the commercial use is by the purchasers themselves for the purpose of earning their livelihood by means of self-employment, such purchasers of goods would continue to be ‘consumers’.

While interpreting the expression “commercial purpose” under the Act, the bench of Justices S. Ravindra Bhat and Aravind Kumar said that if the dominant purpose of purchasing the goods or services is for a profit motive and the said fact is evident from the record, such purchaser would not fall under the ambit of ‘consumer’, as defined under Section 2(1)(d) of the Act(Rohit Chaudhary & Anr. vs M/s Vipul Ltd).

The bench, however, remarked that if a person purchases the goods or services not for any commercial purpose but for one’s own use, it cannot be said that even in such circumstances the transaction would be for a commercial purpose attributing profit motive, excluding the person from the definition of ‘consumer’.

The court made the observation while referring to the Explanation to Section 2(1)(d), as inserted by the Ordinance/Amendment Act of 1993, which excludes certain purposes from the purview of the expression “commercial purpose”. As per the Explanation, if the commercial use is by the purchaser himself for the purpose of earning his livelihood by means of self-employment, such purchaser of goods would continue to be a ‘consumer’.

The Court referred to the judgment in Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers and others (2019) which held that a strait-jacket formula was not available to decide if the use is commercial in nature and that it would depend on the facts and circumstances on each case.

In view of the same, the court said that when there is an assertion in the consumer complaint that goods are purchased by the complainant for earning its livelihood, such complaint cannot be nipped at the bud and dismissed. In such cases, evidence tendered by parties will have to be evaluated by the Consumer Court or Commission on the basis of pleadings to arrive at a conclusion whether the complainant is a ‘consumer’ or not.

Facts of the case:

The appellants had booked a commercial space in a commercial complex promoted by one M/s Vipul Ltd. After the latter failed to deliver possession of the office space unit allotted to them, the appellant-buyers repudiated the buyer’s agreement and approached the National Consumer Disputes Redressal Commission (NCDRC) seeking refund of the amount deposited with the developer.

The Commission, however, dismissed the complaint on the ground of maintainability, holding that the appellants were not ‘consumers’ under the Act as they were already carrying on a business for the purpose of their livelihood. Noting that the complainants were running a dealership business of Reliance Industries for their livelihood and were also engaged in the business of investment in property, the Commission concluded that in view of the same, the commercial space booked by them cannot be said to be for the purposes of earning livelihood by self-employment. Accordingly, the appellants were not consumers as defined under Section 2(1)(d) of the Act, the Commission held.

Analysis of the Supreme Court:

In the appeal filed before the Supreme Court, the top court referred to the definition of ‘Consumer’ under Section 2(1)(d) of the Act, noting that a person who obtains goods/services for re-sale or for any commercial purpose has been excluded from the scope of ‘Consumer’ under the Act.

“Going by the plain dictionary meaning of the words used in the definition section the intention of Parliament must be understood to be to exclude from the scope of the expression “consumer” any person who buys goods for the purpose of their being used in any activity engaged on a large scale for the purpose of making profit. The words ‘for any commercial purpose’ must be understood as covering the cases other than those of resale of the goods,” said the court.

It added: “The Parliament intended to exclude from the scope of definition not merely persons who obtain goods for resale but also those who purchase goods with a view to using such goods for carrying on any activity on a large scale for the purpose of earning profit.”

The bench, however, remarked that when there is an assertion in the consumer complaint filed before the Consumer Court or Commission that the particular goods are purchased for earning livelihood, such complaint cannot be nipped at the bud and dismissed.

“Primarily it has to be seen as to whether the averments made in the complaint would suffice to examine the same on merits and in the event of answer being in the affirmative, it ought to proceed further. On the contrary, if the answer is the negative, such complaint can be dismissed at the threshold. Thus, it would depend on facts and circumstances of each case,” the court said, adding that there is no mathematical formula to examine the claims for non-suiting the complainant on the ground that he doesn’t fall within the definition of ‘consumer’ under the Act.

Referring to the facts of the case, the court observed that the appellants had specifically pleaded in their consumer complaint that they were in search of office space “for their self-employment and to run their business and earn their livelihood”. The bench further took note that the appellants had nowhere stated that they had proposed to purchase the office space for either selling it for a higher price or as an investment for being sold in the future.

The court added that the statement of the complainant that he was engaged in the business of investment/dealing in property, would not ipso facto suggest or indicate that the property proposed to be purchased from the developer was for commercial purpose.

“In this scenario, the finding recorded by the Commission in Paragraph 8 of impugned order is erroneous and contrary to the definition clause of the expression “consumer” as defined under section 2(1)(d),” the court concluded.

The court noted that the dispute related back to 2006 and the appellants had paid over Rs.51 lakhs to the developer, however, the allotted office space was not delivered even after expiry of the stipulated time period. It further observed that it was not the case of the developer that the office space was being ready to be occupied or delivered to the complainant-buyers.

“Hence, to balance the equities, it would be appropriate to direct the respondent to refund the amount it has received from appellants with interest calculated @ 12% per annum which would not only meet the ends of justice but would also offset the interest loss if at all, if any caused to the respondent on account of delayed payments of the instalments by the appellants and keeping in mind the appreciated value of the asset namely office premises which was proposed to be sold by the respondent to the appellant,” the court ruled.

Allowing the appeal, the court set aside the order passed by the NCDRC, directing the respondent-developer to refund the amount along with interest to the appellant-complainants.

Case Title: Rohit Chaudhary & Anr. vs M/s Vipul Ltd.

Citation : 2023 LiveLaw (SC) 754

Counsel for the parties: Mr. Ajay Kumar Singh, AOR Mr. Dhigendra K Sharma, Adv. Mr. Anubhaw Bhandari, Adv. Ms. Niharika Dubey, Adv., Mr. M. R. Shamshad, AOR Mr. Atul Sharma, Adv. Mr. Ankur Sharma, Adv. Mr. Alok Tripathi, AOR.

Consumer Protection Act, 1986: Section 2(1)(d)

The Supreme Court has ruled that a person buying goods either for resale or for use in large-scale profit-making activity, will not be a ‘consumer’ entitled to protection of the Consumer Protection Act, 1986-While interpreting the expression ‘commercial purpose’ under the Act, the bench of Justices S. Ravindra Bhat and Aravind Kumar said that if the dominant purpose of purchasing the goods or services is for a profit motive and the said fact is evident from the record, such purchaser would not fall under the ambit of ‘consumer’, as defined under Section 2(1)(d) of the Act. However, the Explanation clarifies that even purchases in certain situations for ‘commercial purposes’ would not take within its sweep the purchaser out of the definition of expression ‘consumer’. In other words, if the commercial use is by the purchaser himself for the purpose of earning his livelihood by means of self-employment, such purchaser of goods would continue to be a ‘consumer’.

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