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When do purchases for commercial purposes come under the Consumer Protection Act,2019 ?

Thu, 12/10/2023 - 11:50

The Consumer Protection Act, 2019 is the primary document of reference concerning any and all cases related to consumer disputes and conflicts. The Act describes a consumer as  anyone who buys goods or avails services for a consideration (ie, a price). The Act also describes who is not a consumer, even though there has been a transaction, as anyone  who buys goods or avails services for further commercial use or profit making purposes. To this, the Act adds a further caveat:  that a person who uses the goods or services is still a consumer if the goods or service obtained constitutes their source of livelihood.  What constitutes a livelihood has been a somewhat contentious issue - and one that this article aims to examine through two Supreme Court judgements. The examination of such cases will give a clearer understanding of how the contention between the phrases ‘self- employment’ and ‘commercial purposes’  has often resulted in controversial cases with people being denied of their inherent  rights and in some cases, the recipients gaining unfair advantages as well, which of course was later struck down by the Courts. 

What is ‘self employment’ and what is ‘commercial purpose’?

In the Laxmi Engg.Works vs P.S.G. Industrial Institute case, the appellant who was in the business of manufacturing machine parts on a large scale, placed an order with the respondent for the supply of a particular machine. The appellant’s case was that the respondent not only supplied the machinery six months beyond the stipulated date but also supplied defective machinery. On examining the consumer complaint, the Supreme Court stressed that the appellant was not a consumer. The apex court pointed out that when a person buys goods with the intention of using such goods for carrying on any activity on a large scale, it is for the purpose of earning a profit and not merely a livelihood. He/she will therefore not be considered a consumer under the Act. 

However, there have also been instances where the purchase of goods for commercial purposes has still been deemed to fall within the  definition of consumer as understood in the Consumer Protection Act, 2019. As Reddy and Kumar (Reddy & Kumar: 2022) point out, the question of what a commercial purpose is, is often reduced to the ‘facts of the question’. This  implies that it is often dependent on the circumstances surrounding the case, necessitated  because the phrase 'commercial purpose’ is not defined in the Consumer Protection Act. Rohit Choudhary vs. Vipul Ltd is a recent case in point where  the National Commission for Redressal of Consumer Disputes (NCDRC) dismissed an appeal about purchase of a commercial space by an appellant. The Commision judged that he  did not meet the Act’s definition of ‘consumer’ as he was running a dealership business of Reliance Industries, while also  engaging  in the real estate business.   The commercial space in question therefore  was for earning profit and not for the purpose of earning a livelihood by self-employment. 

However, the Supreme Court ruled that the commercial space was for the appellants’ office space and therefore "for their self-employment and to run their business and earn their livelihood”. Further, it said that just because the appellant stated that he engaged in the business of investment/dealing in property, it cannot automatically be interpreted that the property proposed to be purchased from the respondent was for commercial purposes. Thus, the Court held that the finding by the Commission in the impugned order is erroneous and contrary to the definition clause of the expression “consumer” as defined under Section 2(1)(d).

From the above mentioned observations of the Supreme Court, it can be understood that the terms ‘self-employment’ and ‘commercial purposes’ are dependent on the context of the cases. Since the phrases themselves have not been defined in the Act, it is incumbent on the complainant to produce evidence of ‘self-employment’ with the transaction in question being towards his/her ‘livelihood’.  As the differences between the two can fall between various shades of gray, and because the  interpretation of this can have significant consequences to the people involved,  it would be good if the government can take care to define the phrases in any upcoming revisions of the Act.

References: G.B. Reddy & Baglekar Akash Kumar, “Consumer Protection Act: A commentary”, EBC Publications, 2022.

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