Facts
The medical trust, which was the appellant, bought 29 flats from buildings developed by Respondent No. 1 to provide housing for nurses employed by its hospital. However, within a few years the structure fell into disrepair, and the appellant vacated the flats in 2002. A structural report by M/s Raje Consultants discovered that reconstruction cost would be lesser than the repair cost. Also, it was alleged that the occupation certificate was obtained from the municipal corporation through fraudulent means. In 2016, the appellant filed a complaint before the National Commission seeking Rs. seven crore sixty five lakh ninety five thousand four hundred as compensation. This included the annual loss of rent from the year 2002 to 2015, cost of reconstruction, and future loss of rent. The complaint was dismissed as time-barred under Section 24A of the CPA. A review application under the National Commission corrected a factual error, but the complaint was again dismissed as it was held that the appellant was not a ‘consumer’ under sub section 1 (d) of the definition clause of the Act.
Issue
At first, the National Commission rejected the complaint through an order dated 1st March 2016, citing limitation as the reason for dismissal. However, it was found and corrected upon review that it was the agreement to sell that was registered on 16.3.1995 and not the ‘conveyance deed’. Despite the correction, the complaint was dismissed yet again on grounds that the complainant trust is not a ‘consumer’ as per sub section 1(d) of Section 2 of the Act. The only issue in the present appeal in the apex court is whether the complainants buying the flats from the respondent to accommodate nurses working in their hospital constitutes a ‘purchase of services for a commercial purpose’; hence, whether the appellant is a ‘consumer’ or not as per the sub section 1(d) of the definition clause of the CPA.
Contention
Learned senior counsel put forward in their submission that the dominant purpose of the purchase must be analysed to determine whether the purchase was for a ‘commercial purpose’ or not relying on Court’s judgement in Laxmi Engineering Works v. P.S.G. Industrial Institute, and Paramount Digital Colour Lab v. Agfa India Private Limited. He contended that the appellant did not buy the flats for commercial purpose since they were bought to make available accomodation facilities for the employed nurses and thus, is unassociated with the hospital’s commercial operations. On the contrary, Senior Advocate for the respondents contended that the flats were bought for a ‘commercial purpose’ as providing accommodation to nurses shall indirectly affect growth and profitability of the business. She referred to the explanation given under sub section 1(d) of section 2 of the Act, only goods and services availed “exclusively for the purpose of earning livelihood by self-employment” are excluded from the ambit of ‘commercial purpose’ and relied on Laxmi Engineering, Cheema Engineering Services v. Rajan Singh, and Kalpavruksha Charitable Trust v. Toshniwal Brothers to support her argument.
Rationale
Firstly, the court argued that there is no direct relation between the acquisition and the profit generating activity because the buying of flats to accommodate nurses is for the welfare of the employees and does not directly affect the profit generation of the hospital. Additionally, the primary purpose of the purchase is to provide comfortable accommodation to nurses and to value their pivotal role in the hospital’s functioning. Therefore, applying the dominant purpose test as laid down in Laxmi Engineering Works v. P.S.G. Industrial Institute and Paramount Digital Colour Lab v. Agfa India Pvt. Ltd., it is apparent that the purchase is not integral to the commercial activities of the hostel.
The court emphasized that such a duty to provide housing facilities to nurses is a positive duty on the part of the employer for the employee welfare. It further adds to keep up the curative care taking function of the hospital. Thus, the court passed that the appellant trust is a ‘consumer’ in the given case as per Sun section 1(d) of the section 2 of the CPA and thus, rejected the respondent’ argument.
Defects in law (lacuna)
The honourable Justice Mohan M. Shantanagoudar addressed that while section 2(1)(d) mentions that any purchase for purpose that is commercial shall exclude the buyer from the ambit of ‘consumer’. It fails to define what makes the purpose of a purchase commercial in nature. There is only the Explanation clause to sub section 1(d) of section 2 of the CPA Act that only goods and services availed “exclusively for the purpose of earning livelihood by self-employment” are excluded from the ambit of ‘commercial purpose’ which is only clarificatory in nature, as was highlighted by this Court in Laxmi Engineering (supra). The court argued that this explanation does not mean that any purchase, that is not exclusively for earning livelihood by self-employment, is done for a purpose that is commercial in nature.
The court relied on the ordinary definition of ‘commercial purpose’ and its interpretations in precedents like Laxmi Engineering (supra), Synco Textiles Pvt. Ltd. v. Greaves Cotton and Company Limited, Paramount Digital Colour Lab (supra), to interpret on what makes a ‘commercial purpose’.
Inference
The CPA of 1986 caters to consumers and thus, it is essential for the buyer to be a consumer as per Sub section 1(d) of the definition clause of the Act, for him to seek redressal under this Act itself. In the given case, determining if the appellant trust is a consumer as per the given definition or not is subject to the purpose of the purchase. Since there is no definition in the Act except the explanation clause for ‘commercial purpose’, the court interpreted the ordinary definition of the same alongside precedents like Laxmi Engineering (supra), etc. The court found the significance of the establishment of direct relation between the intent behind the purchase and the profit generation in determining whether as per the facts of the case, a buyer is a consumer. It also applied the dominant purpose test. The court also found that a business entity that buys something for a beneficiary or for welfare purposes (includes employee welfare as in the given case), is still a consumer based on the above theories.
In the present day, scale of commercial activities and consumption and welfare have increased significantly. This has blurred the lines of differences between them. To address consumer complaints speedily, clear legal thinking on ‘who is a consumer’ as per the CPA is necessary. This judgement stands a significant milestone in putting forward a clear legal thought in this matter.
Written by Vanshika Rathi
Jindal Global Law Schhol