lawyers in India

Purchaser for Commercial Purpose: Still a Consumer

Written by: Adv.N.Chandrashekharayya, M.Com., LL.B.
Patent law
Legal Service
  • Section 2(1)(d) of the Consumer Protection Act, 1986 (COPRA) defines a consumer as a person who:

    (i) Buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised or under any system of deferred payment when such use is made with the approval of such person but does not include a person who obtains such goods for resale or for any commercial purpose; or

    (ii) Hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person but does not include a person who avails of such services for any commercial purpose.

    A reading of the above definition of the term consumer makes it clear the Parliament wanted to exclude from the scope of the definition the persons who obtain goods for resale and also those who purchase goods with a view to using such goods for carrying on any activity for earning. The immediate purpose as distinct from the ultimate purpose of purchase, sale in the same form or after conversion and a direct nexus with profit or loss would be the determinants of the character of a transaction-whether it is of a "commercial purpose" or not. Thus buyers of goods or commodities for "self consumption" in economic activities in which they are engaged would be consumers as defined in the Act.

    In Laxmi Engineering Works V. PSG Industries, AIR 1995 SC 1428 the Supreme Court laid down the test as close and direct nexus with the commercial activity. It is not the value of goods but the purpose for which it was purchased that matters.

    The intention of Parliament is to deny the benefits of the Act to persons purchasing goods either for the purpose of resale or for the purpose of being used in profit making activity engaged on a large scale. Thus the persons who purchase of goods for consumption or use in the manufacture of goods or commodities on a large scale with a view to make profit will all fall outside the scope of the definition of consumer. The National Commission held that in order that exclusion clause should apply it is however necessary that there should be a close nexus between the transaction of purchase of goods and the large scale activity carried on for earning profit :Super Engineering Corpn. (Huf) Vs. Sanjay Vinayak Pant & Anr.1992-CPJ-1-95-NC.

    In H.C.L. Ltd. - Vs. - Krishna Nanu Naik 1993-CPJ-2-174-NC ; 1993-CTJ-1-101-NC ; facts revealed that the purchase of the computer system was for a commercial purpose, and it had close nexus with the commercial activity of the respondent company and also the respondent company was found to be a large commercial organization. Relying on the judgement rendered by it in Synco Textiles Pvt. Ltd. v. Greaves Cotton & Co. Ltd. 1991-CPJ-1-499-NC the National Commission held that those two points would decide the question of commercial purpose.

    But there are circumstances where in spite of the purchaser purchasing the goods for commercial purpose he is treated as the consumer for the purpose of granting relief under the COPRA.

    In C. P. Moosa - Vs. - Chowgle Industries Ltd. 2001-CPJ-3-9-NC ; 2001-CPR-2-92-NC ; the appellant had purchased EPBAX system for his hotel with warranty and annual maintenance contract. There was deficiency of service during warranty period and AMC period. The National Commission held that case falls under Section 2(1)(d)(ii) and appellant entitled to compensation.

    In Dr. Vijai Prakash Goyal Petitioner v. The Network Limited

    Respondent1998-CPJ-1-31-NC the revision was filed against the order dated 15.7.1998 of Consumer Disputes Redressal Commission Uttar Pradesh, Lucknow allowing appeal against the majority judgment dated 16.11.1996 of a District Forum and dismissing complaint filed by the petitioner. The complaint was dismissed on the ground that the petitioner was not a consumer. Petitioner filed complaint, inter alia, alleging that he along with his wife has been running a maternity home at 10/60, Katar Madari Khan, Agra. Petitioner placed an order on 22.2.1994 for supply of Ultrasound Scanner Model 212 on the respondent opposite party. Respondent supplied the machine on 31.3.1994. Warranty was of one year. It was alleged that after installation, the machine went out of order. Engineer deputed by the respondent on checking found that the machine needed to be replaced, it being defective. Respondent had not replaced/repaired the machine despite repeated requests including service of legal notice dated 5/8.12.1994 by the petitioner. Respondent contested the complaint by filing written version. Purchase of Ultrasound Scanner model 212 by the petitioner was not denied. However, it was pleaded that petitioner is not a consumer as defined in Consumer Protection Act, 1986. The said notice dated 5/8.12.1994 which was replied to by the respondent was got served through Counsel by the petitioner during the warranty period of one year which was to expire on 17.4.1995 itself. Reiterating its earlier judgments in Jay Kay Puri Engineers and Others v. Mohan Breiveries and Distilleries, I (1998) CPJ 38 (NC) and many other decisions, the National Commission held that purchaser of a machine would be a consumer if the defect in machine develops within warranty period even though the machine was purchased for commercial purpose.

    In yet another recent case the complainant a company had purchased computer system along with related accessories from the opposite party. The intellifax machine, which was supplied with the computer, was not giving performance up to the mark and the same was defective. When the dispute went to the reddressal forum under the COPRA the opposite party contended that the complainant was not a consumer as the computer and the machine were purchased by the company for business purpose i.e. for commercial purpose. However the defect in the machine was intimated to the opposite party within the warranty period. The National Commission held that the purchaser of the machinery would certainly be a consumer in respect of defect in machine during period of warranty: Super Computer Centre V. Globiz Investment Pvt.Ltd. III (2006) CPJ 265 (NC).

    Thus it is clear from a series of judgments that even the person who purchases goods for commercial purpose is also a consumer if the defects in the goods purchased are found during the warranty period.

    Related Consumer law articles:
    How to Lodge a Consumer Complaint
    Consumer the King
    Consumer Justice In India
    Consumer Protection Act, 1986
    The Consumer Protection (Amendment) Act
    Consumerism in the Globalize world
    Judicial Interpretation of Medical Negligence under Consumer Protection
    Instances of Disingenuous Advertisements and Consumers

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