As per the case facts, an insurance company challenged a decision by the National Consumer Disputes Redressal Commission. The Commission had overturned a previous State Commission ruling, asserting that an ...
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO(S).53525353 OF 2007
NATIONAL INSURANCE CO. LTD. ….APPELLANT(S)
VERSUS
HARSOLIA MOTORS AND OTHERS ….RESPONDENT(S)
WITH
CIVIL APPEAL NO(S).5354 OF 2007
CIVIL APPEAL NO(S).2821 OF 2012
CIVIL APPEAL NO(S).3350 OF 2018
CIVIL APPEAL NO(S). OF 2023
(@ SPECIAL LEAVE PETITION (CIVIL) NO(S).1039 OF 2020)
J U D G M E N T
Rastogi, J.
CIVIL APPEAL NO(S).53525353 OF 2007
1
1.The assail in the present appeals by special leave is to
judgment and order passed by the National Consumer Disputes
Redressal Commission (hereinafter “National Commission”) dated
3
rd
December, 2004, whereby the National Commission, while
reversing the finding of the Gujarat State Consumer Disputes
Redressal Commission (hereinafter “State Commission”), regarding
maintainability of the complaint filed at the instance of the
respondent under the Consumer Protection Act, 1986 (hereinafter
“Act, 1986”) held that a person who takes insurance policy to cover
the envisaged risk does not take the policy for the commercial
purpose. Policy is only for indemnification of an actual loss and is
not intended to generate profits and finally held that the respondent
(insured) was a consumer as defined under Section 2(1)(d) of the
Act, 1986 and the complaint filed at his instance was maintainable
and be examined by the State Commission on merits.
2.Respondent no.1 (dealer in TATA vehicles) and respondent
no.2 are the claimants. Respondent no.1 took out a fire insurance
policy with the appellant for a cover of Rs.75,38,000/ and
respondent no.2 for a cover of Rs.90 lakhs. That on 28
th
February,
2
2002, damage was caused to the goods of respondent nos.1 and 2
due to fire (during the course of Godhra riots). The appellant
denied the claim of respondent no.1, while admitting the claim of
respondent no.2 to the extent of Rs.54,29,871/. The respondents
filed complaint before the State Commission.
3.Respondent no.1 M/s Harsolia Motors, a commercial entity
engaged in the business of sale of vehicles, took fire insurance
policy from the appellant insurance company covering the office,
showroom, garage, machinery lying in the showroom premises, etc.
The grievance of the respondent was that their aforesaid premises
were damaged during the Godhra riots on 28
th
February, 2002. A
complaint was instituted by the respondent, M/s Harsolia Motors, a
partnership firm, before the State Commission, for compensation of
damage caused on the ground that postGodhra incident, which
took place on 27
th
February, 2002, riots broke out resulting into
complainant’s goods being destroyed by fire set up by rioters on 28
th
February, 2002 and the respondent/complainant was entitled to be
indemnified the insured sum under the policy of insurance.
3
4.The State Commission held that the respondent is not covered
under the expression “consumer” as defined under Section 2(1)(d) of
the Act, 1986 and held that the complainant being a company
running a business from the premises to earn profits falls under the
term “for commercial purpose” and the complaint is not
maintainable under the provisions of the Act, 1986.
5.On an appeal being preferred by the respondent insured before
the National Commission, the question arose as to whether the
insurance policies taken by a commercial unit could be held to be
hiring of services for commercial purpose and are hereby excluded
from the provisions of the Act, 1986 after revisiting the provisions of
the Act, 1986 and the definition of the terms “consumer” and
“service” as defined under Section 2(1)(d) and 2(1)(o) of the Act,
1986, respectively the Commission recorded a finding that the
expression used “for any commercial purpose” would mean that the
goods purchased or services hired should be used in any activity
directly intended to generate profit and profit is the main aim of
commercial purpose, but in a case where goods purchased or
services hired in an activity which is not intended to generate profit,
4
it would not be a commercial purpose and held that a person who
takes the policy of insurance to cover the envisaged risk, for
indemnification of actual loss suffered is not ordinarily intended to
generate profits and accordingly held that the
respondent/complainant was a “consumer” under Section 2(1)(d) of
the Act, 1986 and complaint filed at its instance is to be
examined/decided by the State Commission on its own merits
under the judgment impugned dated 3
rd
December, 2004, is a
subject matter of challenge in appeal before this Court at the
instance of the appellant insurance company.
6.While the notices were issued by this Court on 15
th
April,
2005, the operation and effect of the judgment impugned was
stayed. In consequence thereof, the complaint filed at the instance
of the respondent has not been examined by the State Commission
on merits so far.
7.The other batch of appeals which were heard along with Civil
Appeal No(s).53525353 of 2007 (National Insurance Co. Ltd. v.
Harsolia Motors and Others) arising from the judgment of the
National Commission, placing reliance on the impugned judgment
5
dated 3
rd
December, 2004, applying the selfsame principles are
also challenged at the instance of the appellant insurer before us.
8.The seminal issue that emanates for our consideration is
whether the insurance policy taken by the respondent (commercial
enterprises) insured amounts to hiring of services for “commercial
purpose” thereby excluded from the purview of the expression
“consumer” as defined under Section 2(1)(d) of the Act, 1986.
9.Learned counsel for the appellant submits that there cannot
be a blanket inclusion of all insurance matters within the purview
of Act, 1986 and if that is being taken at the face value, it would
render the provisions of the Commercial Courts Act, 2015
(hereinafter “Act, 2015”) nugatory and submits that Section 2(1)(XX)
of the Act,2015 includes insurance and reinsurance within the
ambit of commercial disputes.
10.Learned counsel further submits that law on the subject has
been examined by this Court in Laxmi Engineering Works v.
P.S.G. Industrial Institute
1
and it was held that “commercial
purpose” is to be looked into, in the facts and circumstances of
1 (1995) 3 SCC 583
6
each case to consider the purpose for which the goods and services
are bought or availed. If it is availed with a view to carrying out
large scale commercial activity with profit motive, then the buyer
would not qualify as a consumer and the Act, 1986 would not be
applicable and the view of this Court has been consistently affirmed
in the later judgments.
11.Learned counsel further submits that the Commission in its
second last para explicitly takes the very policy of insurance within
the purview of the Act, 1986 and in sequel thereof, regardless of the
nature of transaction, whenever there is a claim for compensation
in reference to the policy of insurance, such complaints became
maintainable under the Act, 1986.
12.Learned counsel further submits that dominant purpose of
obtaining insurance contracts by the business entities is to earn
profits and thus has a close and direct nexus with it and
accordingly these entities are not entitled to file the claim before the
Consumer Court seeking summary proceedings and the present
disputes are not of a small disgruntled consumer who is seeking
claim of an insurance for loss of mobile for personal use, or of
7
autorickshaw driver seeking claim for expenses incurred for fixing a
defective engine as that is covered for his livelihood. The instant
dispute pertains to large scale business entities entering into
commercial agreements with the insurance companies to protect
the risks associated in carrying out their businesses. If they are
being permitted to invoke the jurisdiction as a consumer under the
Act, 1986, it will frustrate the very mandate of the legislative
wisdom, pursuant to which this Act has been enacted.
13.Learned counsel further submits that the doctrine of election
is not available to the litigant who is aggrieved by the insurance
contract as Section 2(1)(d) of the Act, 1986 and Section 2(7) of the
Consumer Protection Act, 2019 Act specifically exclude the
provisions of services “for commercial purpose” from the ambit of
consumer courts and the only remedy lies to the commercial courts
under the Act, 2015.
14.Learned counsel submits that if contention to the contrary of
insurance for commercial activities falling within the ambit of the
Act, 1986 is to be accepted, then obtaining any service for any
commercial activity even for facilitating profit generation for
8
commercial enterprise would fall within the expression “consumer”
as defined under Section 2(1)(d) of the Act, 1986 and it would lead
to improbability as it would go against the basic tenets of service
being used for commercial ends whose violation give rise to civil
action and not consumer redressal.
15.Learned counsel further submits that if the respondent’s
submission of insurance as a service availed by any person within
the meaning of the Act is accepted, this would entail an exponential
growth of consumer disputes across the country, not only would
that lead to frustration of literal spirit and intent of the socially and
economically beneficial legislation, rather it would inadvertently give
rise to the premiums charged by the insurance company which
would again subserve the overall intent of the Act, as actual
consumers who regularly avail the services will have to pay more for
the same coverage and this can be taken note from the Statement of
Objects and Reasons which was kept in mind for the purpose of
making the amendment in the year 2002.
16.Learned counsel lastly submits that the purchase of insurance
policy has a direct nexus with the commercial activity in a large
9
scale enterprise. In other words, the insurance policy indemnifies
the company against loss arising out of fire, earthquake or any
other insured peril. What is reimbursed by the insurance company
is a loss and loss is directly interlinked with the commerce of the
company and, therefore, a complaint seeking reimbursement of a
loss would not be maintainable before the Consumer Court if it is
filed by a largescale commercial entity like the respondent herein
and the interpretation addressed by the National Commission of the
provisions of the Act, 1986 not only runs contrary to the judgments
of this Court, it is otherwise not legally sustainable and deserves to
be interfered by this Court.
17.Per contra, learned counsel for the respondent, submits that
the purchase of insurance policy cover is a contract of
indemnification of particular risk and not a contract of doing or not
doing something to earn profit/loss out of such act. If the
contemplated risk out of particular eventuality i.e., fire, flood, etc.,
does not occur, then there is no question of encashment of policy
cover, and if this happens what is payable is the risk amount
against premium paid in advance. Under the circumstances, the
10
insurance policy cover is being offered/purchased not basically to
earn profit, but to cover the uninvited risk, hence, buying of policy
cover is not for commercial purpose even if it is purchased by
commercial enterprises and what is commercial purpose is well
defined not only in several dictionaries but also in the judgments of
this Court and submitted that it may be noticed that the Act, 1986
bars only a transaction for “commercial purpose” but it does not bar
any commercial enterprise to be a consumer and hence the
commercial enterprise can be a buyer/consumer and can enforce
its rights as a consumer, provided immediate intent is to generate
profit out of such transaction by the commercial enterprise, as held
by this Court in Madan Kumar Singh (Dead) Through LR. v.
District Magistrate, Sultanpur and Others
2
.
18.Learned counsel further submits that any transaction by
commercial enterprises even without immediate intention to make
profit cannot be regarded for “commercial purpose”, otherwise all
transactions by commercial enterprises may or may not have even
remote corelation of generating profit will be treated for commercial
2 (2009) 9 SCC 79
11
purposes. Say, for example, a company buying a water plant for its
workers or for any stranger/outsider to serve free water or paint
tins in bulk for upgrading walls etc. have no direct effect of earning
profit out of it. Thus, buying a water plant cannot be treated for
commercial purpose, otherwise virtually all transactions by
commercial enterprise will get colour of commercial purpose and
had it been such an intention of the legislature, then it would have
worded the definition of term “consumer” differently – instead of
“any person” would have used “any person other than commercial
enterprises”, but the statute in its wisdom has allowed to cover
commercial transaction with commercial purpose. Therefore, the
transactions by the commercial enterprises per se cannot be
considered as an exclusion altogether under the Act, 1986.
19.We have heard learned counsel for the parties and with their
assistance perused the material available on record.
20.Before we proceed to examine the issue raised for our
consideration, it will be apposite to take a bird’s eyeview of the Act,
1986.
12
21.The Act, 1986 is a social benefitoriented legislation and,
therefore, the Court has to adopt a constructive liberal approach
while construing the provisions of the Act. To begin with the
Preamble of the Act, 1986 which can afford useful assistance to
ascertain the legislative intention, it was enacted to provide for the
protection of the interests of consumers. Use of the word
“protection” furnishes key to the minds of makers of the Act.
Various definitions and provisions which elaborately attempt to
achieve this objective have to be construed in this light without
departing from the settled law that a Preamble cannot control
otherwise plain meaning of a provision.
22.In fact, the law meets long felt necessity of protecting the
common man from such wrong for which the remedy under
ordinary law for various reasons has become illusory. Various
legislations and regulations permitting the State to intervene and
protect interests of the consumers have become a haven for
unscrupulous ones as the enforcement machinery either does not
move or it moves ineffectively and inefficiently for reasons which are
not necessary to be stated.
13
23.The importance of the Act lies in promoting welfare of the
society by enabling the consumer to participate directly in the
market economy. A scrutiny of various definitions such as
“consumer”, “service”, “trader”, “unfair trade practice” indicates that
legislature has attempted to widen the ambit and reach of the Act.
Each of these definitions are in two parts, one explanatory and the
other inclusive. The explanatory or the main part itself uses
expressions of amplitude indicating clearly its wide sweep within its
ambit to widen such things which otherwise would have been
beyond its natural import.
24.The provisions of the Act, 1986 thus have to be construed in
favour of the consumer to achieve the purpose of enactment as it is
a social benefitoriented legislation. The primary duty of the
Court/Commission while construing the provisions of such an Act
is to adopt a constructive approach subject to that it should not do
violence to the language of the provisions and is not contrary to
attempted objective of the enactment.
25.Section 2(1)(d) defines “consumer”, Section 2(1)(m) defines “a
person” and Section 2(1)(o) defines “service”, which are relevant to
14
examine the moot question raised for our consideration are
reproduced hereunder:
“2. Definitions. In this Act, unless the context otherwise requires,
……..
(d) "consumer" means any 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 payments, when such
services are availed of with the approval of the firstmentioned
person;
Explanation: For the purposes of subclause (i), "commercial
purpose" does not include use by a consumer of goods bought and
used by him exclusively for the purpose of earning his livelihood,
by means of selfemployment;
……
(m) "person" includes
(i) a firm whether registered or not;
(ii) a Hindu undivided family;
(iii) a cooperative society;
(iv) every other association of persons whether registered under the
Societies Registration Act, 1860 (22 of 1860) or not;
…….
15
(o) "service" means service of any description which is made available
to potential users and includes the provision of facilities in connection
with banking, financing, insurance, transport, processing, supply of
electrical or other energy, board or lodging or both, [housing
construction], entertainment, amusement or the purveying of news or
other information, but does not include the rendering of any service
free of charge or under a contract of personal service.”
26.The word “consumer” is the fulcrum of the Act. Since the Act
hinges on the twin concepts of defect in goods or any deficiency in
service, a consumer is one who buys any goods or hires any service.
The term “consumer” has, thus, been defined to mean a person who
is –
(a)a buyer, or
(b)with the approval of the buyer, the user, of the goods in
question, or
(c)a hirer or person otherwise availing, or
(d)with the approval of such aforesaid persons, the beneficiary, of
the service or services in question
With the condition super added that such buying of the goods or
hiring or availing of any such service, is for a consideration,
(i)paid, or
16
(ii)promised, or
(iii)partly paid or promised, or
(iv)covered by any system of deferred payment.
27.However, the word “consumer” so defined does not include a
person, who, in case of goods obtains such goods for resale or for
any commercial purpose, or who, in case of service, avails of such
services, for any commercial purpose. An explanation appended to
the above definition states that the expression “commercial
purpose” does not include the use by the buyer of such goods or the
person availing such service or services, exclusively for the purpose
of earning his livelihood by means of selfemployment.
28.It may be noticed that Section 2(1)(m) defines “person” and
includes a firm, whether registered or not, apart from other
categories without any distinction, big or small. So, as “services”
defined under Section 2(1)(o) includes banking, insurance and if
there is deficiency in service in the matter of banking/insurance,
etc., subject to the fact that he is a consumer under Section 2(1)(d),
17
remedy is always available to such a consumer to invoke the
jurisdiction of the Act, 1986.
29.This Court adverted to the concept of “consumer” as defined
under the Act, analysing the definition in the context of the Act, in
Lucknow Development Authority v. M.K. Gupta
3
held :
“3……It is in two parts. The first deals with goods and the other
with services. Both parts first declare the meaning of goods and
services by use of wide expressions. Their ambit is further enlarged
by use of inclusive clause. For instance, it is not only purchaser of
goods or hirer of services but even those who use the goods or who
are beneficiaries of services with approval of the person who
purchased the goods or who hired services are included in it. The
legislature has taken precaution not only to define ‘complaint’,
‘complainant’, ‘consumer’ but even to mention in detail what would
amount to unfair trade practice by giving an elaborate definition in
clause (r) and even to define ‘defect’ and ‘deficiency’ by clauses (f)
and (g) for which a consumer can approach the Commission. The
Act thus aims to protect the economic interest of a consumer as
understood in commercial sense as a purchaser of goods and in
the larger sense of user of services. The common characteristics of
goods and services are that they are supplied at a price to cover
the costs and generate profit or income for the seller of goods or
provider of services. But the defect in one and deficiency in other
may have to be removed and compensated differently. The former
is, normally, capable of being replaced and repaired whereas the
other may be required to be compensated by award of the just
equivalent of the value or damages for loss……”
30.Later, this Court in Laxmi Engineering Works (supra), while
dealing with the connotative expanse of the term “consumer” in the
unamended form and the explanation added to the expression
3 (1994) 1 SCC 243
18
“Consumer” by an amendment, ruled that such explanation is
clarificatory in nature and taking note of the explanation added by
the amendment Act, 1993 extensively examined the definition of the
term “consumer” as under:
“11. Now coming back to the definition of the expression
‘consumer’ in Section 2(d), a consumer means insofar as is
relevant for the purpose of this appeal, (i) a person who buys any
goods for consideration; it is immaterial whether the consideration
is paid or promised, or partly paid and partly promised, or whether
the payment of consideration is deferred; (ii) a person who uses
such goods with the approval of the person who buys such goods
for consideration; (iii) but does not include a person who buys such
goods for resale or for any commercial purpose. The expression
‘resale’ is clear enough. Controversy has, however, arisen with
respect to meaning of the expression “commercial purpose”. It is
also not defined in the Act. In the absence of a definition, we have
to go by its ordinary meaning. ‘Commercial’ denotes “pertaining to
commerce” (Chamber's Twentieth Century Dictionary); it means
“connected with, or engaged in commerce; mercantile; having profit
as the main aim” (Collins English Dictionary) whereas the word
‘commerce’ means “financial transactions especially buying and
selling of merchandise, on a large scale” (Concise Oxford
Dictionary). The National Commission appears to have been taking
a consistent view that where a person purchases goods “with a
view to using such goods for carrying on any activity on a large
scale for the purpose of earning profit” he will not be a ‘consumer’
within the meaning of Section 2(d)(i) of the Act. Broadly affirming
the said view and more particularly with a view to obviate any
confusion the expression “large scale” is not a very precise
expression Parliament stepped in and added the explanation to
Section 2(d)(i) by Ordinance/ Amendment Act, 1993. The
explanation excludes certain purposes from the purview of the
expression “commercial purpose” a case of exception to an
exception. Let us elaborate: a person who buys a typewriter or a
car and uses them for his personal use is certainly a consumer but
a person who buys a typewriter or a car for typing others' work for
consideration or for plying the car as a taxi can be said to be using
the typewriter/car for a commercial purpose. The explanation
19
however clarifies that in certain situations, purchase of goods for
“commercial purpose” would not yet take the purchaser out of the
definition of expression ‘consumer’. If the commercial use is by the
purchaser himself for the purpose of earning his livelihood by
means of selfemployment, such purchaser of goods is yet a
‘consumer’. In the illustration given above, if the purchaser himself
works on typewriter or plies the car as a taxi himself, he does not
cease to be a consumer. In other words, if the buyer of goods uses
them himself, i.e., by selfemployment, for earning his livelihood, it
would not be treated as a “commercial purpose” and he does not
cease to be a consumer for the purposes of the Act. The
explanation reduces the question, what is a “commercial purpose”,
to a question of fact to be decided in the facts of each case. It is not
the value of the goods that matters but the purpose to which the
goods bought are put to. The several words employed in the
explanation, viz., “uses them by himself”, “exclusively for the
purpose of earning his livelihood” and “by means of self
employment” make the intention of Parliament abundantly clear,
that the goods bought must be used by the buyer himself, by
employing himself for earning his livelihood. A few more
illustrations would serve to emphasise what we say. A person who
purchases an autorickshaw to ply it himself on hire for earning
his livelihood would be a consumer. Similarly, a purchaser of a
truck who purchases it for plying it as a public carrier by himself
would be a consumer. A person who purchases a lathe machine or
other machine to operate it himself for earning his livelihood would
be a consumer. (In the above illustrations, if such buyer takes the
assistance of one or two persons to assist/help him in operating
the vehicle or machinery, he does not cease to be a consumer.) As
against this a person who purchases an autorickshaw, a car or a
lathe machine or other machine to be plied or operated exclusively
by another person would not be a consumer. This is the necessary
limitation flowing from the expressions “used by him”, and “by
means of selfemployment” in the explanation. The ambiguity in
the meaning of the words “for the purpose of earning his livelihood”
is explained and clarified by the other two sets of words.
and after a fair analysis of the definition “consumer”
postamendment 1993 finally held as under:
“21. We must, therefore, hold that:
20
(i) The explanation added by the Consumer Protection
(Amendment) Act 50 of 1993 (replacing Ordinance 24 of 1993) with
effect from 1861993 is clarificatory in nature and applies to all
pending proceedings.
(ii) Whether the purpose for which a person has bought goods is a
“commercial purpose” within the meaning of the definition of
expression ‘consumer’ in Section 2(d) of the Act is always a
question of fact to be decided in the facts and circumstances of
each case.
(iii) A person who buys goods and uses them himself, exclusively
for the purpose of earning his livelihood, by means of self
employment is within the definition of the expression ‘consumer’.”
31.The exposition of law on the subject was further considered by
this Court in Lilavati Kirtilal Mehta Medical Trust v. Unique
Shanti Developers and Others
4
in which one of us (Rastogi, J.)
was a member and the question arose for consideration was
whether the purchase of flats for the purpose of providing
accommodation to nurses employed by the Lilavati Kirtilal Mehta
Medical Trust hospital qualifies a purchase of services for
commercial purpose and whether the Hospital Trust was excluded
from the definition of “consumer” under Section 2(1)(d) of the Act,
1986, this Court after revisiting the scheme of the Act, 1986 and
taking note of the law of precedence in Laxmi Engineering Works
(supra) of which a reference has been made and placing reliance on
4 (2020) 2 SCC 265
21
the judgment of this Court in Paramount Digital Colour Lab and
Others v. AGFA India Private Limited and Others
5
held that a
person whether or not a consumer or other activities meant for
commercial purpose will always depend upon the facts and
circumstances of each case.
32.It may be a case that a person who is engaged in commercial
activities has purchased goods or availed of service for his personal
use or consumption or for the personal use of a beneficiary and
such purchase is not linked to their ordinary profits generating
activities or for creation of selfemployment, such a person may still
claim to be a consumer and after discussion of various illustrations
summarized the discussion after taking note of the broad principles
that were culled out for determination whether the activity or
transaction is for a commercial purpose, held as under:
“19. To summarise from the above discussion, though a strait
jacket formula cannot be adopted in every case, the following
broad principles can be culled out for determining whether an
activity or transaction is “for a commercial purpose”:
19.1. The question of whether a transaction is for a commercial
purpose would depend upon the facts and circumstances of each
case. However, ordinarily, “commercial purpose” is understood to
include manufacturing/industrial activity or businesstobusiness
transactions between commercial entities.
5 (2018) 14 SCC 81
22
19.2. The purchase of the good or service should have a close and
direct nexus with a profitgenerating activity.
19.3. The identity of the person making the purchase or the value
of the transaction is not conclusive to the question of whether it is
for a commercial purpose. It has to be seen whether the dominant
intention or dominant purpose for the transaction was to facilitate
some kind of profit generation for the purchaser and/or their
beneficiary.
19.4. If it is found that the dominant purpose behind purchasing
the good or service was for the personal use and consumption of
the purchaser and/or their beneficiary, or is otherwise not linked
to any commercial activity, the question of whether such a
purchase was for the purpose of “generating livelihood by means of
selfemployment” need not be looked into.”
33.This Court noticed that the hostel facilities were provided to
the nurses employed by Lilavati hospital but after some time of
completion of the project because of alleged poor building quality,
the structure became dilapidated and the nursing staff had to
vacate the flats being used by them and a consumer complaint filed
by the Lilavati hospital for compensation on account of annual loss
of rent was maintainable and whether the Trust was a consumer
under Section 2(1)(d) of the Act.
34.In Lilavati Kirtilal Mehta Medical Trust (supra), this Court
observed that there is no nexus between the purchase of flats by
the appellant Trust and its profit generating activity as the flats
were not occupied for undertaking any medical/diagnostic facilities
23
within the hospital, but for accommodating the nurses employed by
the hospital. In the given circumstances, it has nothing to do with
earing of profits in providing facilities to the nurses and held that
the Trust is a “consumer” under Section 2(1)(d) of the Act, 1986 for
the transaction under consideration.
35.Thus, what is important is the transaction in reference to
which the claim has been filed under the Act, 1986 by a person who
claims himself to be a “consumer” covered under Section 2(1)(d) of
the Act, 1986, such exposition of law on the subject has been
further reiterated by this Court recently in Shrikant G. Mantri v.
Punjab National Bank
6
and after the analysis on the subject and
taking note of the judgment of this Court in Lilavati Kirtilal
Mehta Medical Trust (supra), of which reference has been made,
examined the case on the facts in question and recorded a finding
that the transaction in question would fall within the definition of
the term “consumer” or “services” for the purpose of invoking
jurisdiction under the Act, 1986.
6 (2022) 5 SCC 42
24
36.Thus, what is culled out is that there is no such exclusion
from the definition of the term “consumer” either to a commercial
enterprise or to a person who is covered under the expression
“person” defined in Section 2(1)(m) of the Act, 1986 merely because
it is a commercial enterprise. To the contrary, a firm whether
registered or not is a person who can always invoke the jurisdiction
of the Act, 1986 provided it falls within the scope and ambit of the
expression “consumer” as defined under Section 2(1)(d) of the Act,
1986.
37.Applying the above principles to the present case, what needs
to be determined is whether the insurance service has a close and
direct nexus with the profit generating activity and whether the
dominant intention or dominant purpose for the transaction was to
facilitate some kind of profit generation for the purchaser and/or
their beneficiary. The fact that the insured is a commercial
enterprise is unrelated to the determination of whether the
insurance policy shall be counted as a commercial purpose within
the purview of Section 2(1)(d) of the Act.
25
38. In the case of Karnataka Power Transmission Corporation
and Another v. Ashok Iron Works Private Limited
7
, this Court
while answering the question in the affirmative observed :
“17. It goes without saying that interpretation of a word or
expression must depend on the text and the context. The resort to
the word “includes” by the legislature often shows the intention of
the legislature that it wanted to give extensive and enlarged
meaning to such expression. Sometimes, however, the context may
suggest that word “includes” may have been designed to mean
“means”. The setting, context and object of an enactment may
provide sufficient guidance for interpretation of the word “includes”
for the purposes of such enactment.
18. Section 2(1)(m) which enumerates four categories, namely,
(i) a firm whether registered or not;
(ii) a Hindu Undivided Family;
(iii) a cooperative society; and
(iv) every other association of persons whether registered
under the Societies Registration Act, 1860 (21 of 1860) or not
while defining “person” cannot be held to be restrictive and
confined to these four categories as it is not said in terms that
“person” shall mean one or other of the things which are
enumerated, but that it shall “include” them.
19. The General Clauses Act, 1897 in Section 3(42) defines
“person”:
“3. (42) ‘person’ shall include any company or association or body
of individuals, whether incorporated or not;”
20. Section 3 of the 1986 Act upon which reliance is placed by
learned counsel for KPTC provides that the provisions of the Act
are in addition to and not in derogation of any other law for the
time being in force. This provision instead of helping the
contention of KPTC would rather suggest that the access to the
remedy provided to (sic under) the Act of 1986 is an addition to the
provisions of any other law for the time being in force. It does not
in any way give any clue to restrict the definition of “person”.
7 (2009) 3 SCC 240
26
21. Section 2(1)(m), is beyond all questions an interpretation
clause, and must have been intended by the legislature to be taken
into account in construing the expression “person” as it occurs in
Section 2(1)(d). While defining “person” in Section 2(1)(m), the
legislature never intended to exclude a juristic person like
company. As a matter of fact, the four categories by way of
enumeration mentioned therein is indicative, Categories (i), (ii) and
(iv) being unincorporate and Category (iii) corporate, of its intention
to include body corporate as well as body unincorporate. The
definition of “person” in Section 2(1)(m) is inclusive and not
exhaustive. It does not appear to us to admit of any doubt that
company is a person within the meaning of Section 2(1)(d) read
with Section 2(1)(m) and we hold accordingly.”
39.Applying the aforesaid test, two things are culled out; (i)
whether the goods are purchased for resale or for commercial
purpose; or (ii) whether the services are availed for any commercial
purpose. The twofold classification is commercial purpose and
noncommercial purpose. If the goods are purchased for resale or
for commercial purpose, then such consumer would be excluded
from the coverage of the Act, 1986. For example, if a manufacturer
who is producing product A, for such production he may be
required to purchase articles which may be raw material, then
purchase of such articles would be for commercial purpose. As
against this, if the same manufacturer purchases a refrigerator,
television or airconditioner for his use at his residence or even for
his office has no direct or indirect nexus to generate profits, it
27
cannot be held to be for commercial purpose and for aforestated
reason he is qualified to approach the Consumer Forum under the
Act, 1986.
40.Similarly, a hospital which hires services of a medical
practitioner, it would be a commercial purpose, but if a person
avails such services for his ailment, it would be held to be a non
commercial purpose. Taking a wide meaning of the words “for any
commercial purpose”, it would mean that the goods purchased or
services hired should be used in any activity directly intended to
generate profit. Profit is the main aim of commercial purpose, but
in a case where goods purchased or services hired is an activity,
which is not directly intended to generate profit, it would not be a
commercial purpose.
41.In other words, to make it further clear, let us have certain
illustrations, as to whether the transaction falls for commercial
purpose or whether the complainant can be held to be a “consumer”
within the scope and ambit of Act, 1986.
28
(i)A CT scan machine was purchased by a Charitable Trust and
that was found to be defective, the question raised whether the
machinery was purchased for a commercial purpose and whether
the appellant was a consumer. From the narration of facts, this
Court in Kalpavruksha Charitable Trust v. Toshniwal Brothers
(Bombay) Pvt. Ltd. and Another
8
held that the machine was
purchased by the Charitable Trust for commercial purpose as every
person who takes a CT scan has to pay for it and the services
rendered are not free and thus the Trust was not a consumer.
(ii).In Rajeev Metal Works and Others v. Mineral & Metal
Trading Corporation of India Ltd.
9
, a manufacturer imported
raw material through statutory authority that acted as a canalizing
agency for manufacture and sale of the finished product. The
appellant approached the National Commission alleging that the
respondent had not supplied the required quantity demanded by
the appellant. This Court held that the purchase was for a
commercial purpose and the manufacturer was not a “consumer”
for the purpose of the Act, 1986.
8 (2000) 1 SCC 512
9 (1996) 9 SCC 422
29
(iii).The bank which had taken bankers indemnity insurance
policy from the insurance company and suffered loss owing to some
of transactions in one of its branches, raised an insurance claim
stating that it is owing to dishonesty of Branch Manager and the
claim was repudiated by the insurance company stating that the
alleged loss was because of some dishonesty of the Branch Manager
and this being for commercial purpose, may not be a consumer.
(iv).The complainant is a private limited company running a
diagnostic clinic and alleges that Xray machine purchased by the
complainant from the opposite party was defective. If an objection
is raised that as machine was purchased for commercial purpose
and the complainant cannot be said to be a consumer as defined
under the Act, 1986 as he has been employed for commercial
purpose and has been carrying out business for profit indeed the
complainant is not a consumer under the Act, 1986.
(v).A company purchased the EPBX system for the better
management of the business of the company for commercial
purpose and the complaint filed for alleged supply of defective
system may not be covered by the explanatory clause of Section 2(1)
30
(d) of the Act, 1986 as the transaction has no nexus to generate
profits.
42.Thus, what is finally culled out is that each case has to be
examined on its own facts and circumstances and what is to be
examined is whether any activity or transaction is for commercial
purpose to generate profits and there cannot be a straightjacket
formula which can be adopted and every case has to be examined
on the broad principles which have been laid down by this Court, of
which detailed discussion has been made.
43.Applying the above principles in the present case, what needs
to be determined is whether the insurance service had a close and
direct nexus with the profit generating activity and whether the
dominant intention or dominant purpose of the transaction was to
facilitate some kind of profit generation for the insured or to the
beneficiary and our answer is in the negative and accordingly we
are of the view that the complaint filed by the respondent insured
herein has no close or direct nexus with the profit generating
activity and the claim of insurance is to indemnify the loss which
the respondent insured had suffered and the Commission has
31
rightly held that the respondent is a “consumer” under Section 2(1)
(d) of the Act, 1986.
44.We further reiterate that ordinarily the nature of the insurance
contract is always to indemnify the losses. Insurance contracts are
contracts of indemnity whereby one undertakes to indemnify
another against loss/damage or liability arising from an unknown
or contingent event and is applicable only to some contingency or
act likely to come in future.
45.This Court in United India Insurance Company Limited v.
Levis Strauss (India) Private Limited
10
has held as under:
“53.A contract of insurance is and always continues to be one for
indemnity of the defined loss, no more no less. In the case of
specific risks, such as those arising from loss due to fire, etc. the
insured cannot profit and take advantage by double insurance.
Long ago, Brett, LJ in Castellain v. Preston [Castellain v. Preston,
(1883) 11 QBD 380] said that : (QBD p. 386)
“….. the contract of insurance … is a contract of indemnity.
… and that this contract means that the assured, in the
case of loss … shall be fully indemnified, but shall never be
more than fully indemnified.””
(emphasis added)
10 (2022) 6 SCC 1
32
46.Thus, it can be concluded that in the instant case hiring of
insurance policy is clearly an act for indemnifying a risk of
loss/damages and there is no element of profit generation and still
what has been expressed by this Court is illustrative; it will always
open to be examined on the facts of each case, as to the transaction
in reference to which the claim has been raised has any close and
direct nexus with profit generating activity.
47.We do not agree with the submission made on behalf of the
appellant that if insurance claims are covered under the Act, 1986,
then virtually all insurance matters will come within the purview of
the Act, 1986 and this will render the Act, 2015 nugatory. In our
view, both these Acts have different scope and ambit and have
different remedial mechanism, are in different sphere having no
internal corelationship.
48.Consequently, the appeals are without substance and
accordingly dismissed. No costs.
49.Let the State Commission may adjudicate the complaint of the
respondents on its own merits in accordance with law and since it
33
is an old matter, be decided expeditiously as possible, but in no
case later than one year.
50.Pending application(s), if any, shall stand disposed of.
CIVIL APPEAL NO(S).5354 OF 2007 – (United India Insurance
Company Limited v. M/s Diwakar Goiram Porkhayat)
51.The present appeal is directed against the order passed by the
National Commission dated 3
rd
December, 2004 holding that the
insurance policy taken by the respondent (commercial unit) in the
facts of the case was only to indemnity the loss which the
respondent/complainant has suffered and the transaction in
reference to which the insurance claim has been repudiated by the
appellant, had no direct nexus with the profit generating activity
and was a “consumer” as defined under Section 2(1)(d) of the Act,
1986.
52.The respondent/complainant (insured) is doing the business
of sale and purchase of jewellery in the name and style of “Khazana
Jewellers” who obtained a policy of insurance from the appellant for
34
the period 21
st
October, 1999 to 20
th
October, 2000 to cover the risk
of ornaments in business.
53.On 24
th
June, 2000, at about 7.00 a.m. when an employee of
the respondent saw that the shutter of the showroom was partly
open and that was indicative of the theft and upon inspection, it
was found that goods worth Rs.20,55,200/ were stolen from the
showroom.
54.On the claim being raised by the respondent to indemnify the
loss suffered, it was repudiated by the appellant and that was
challenged by the respondent by filing a consumer complaint before
the State Commission, Ahmedabad, that was dismissed on the
premise that the respondent was not a “consumer” within the ambit
of Section 2(1)(d) of the Act, 1986 by an order dated 1
st
April, 2004.
55.The respondent challenged the order of dismissal by an appeal
before the National Commission taking note of the nature of the
transaction and relying upon the order of the Commission in the
case of M/s Harsolia Motors dated 3
rd
December, 2004, the
Commission held that the transaction in reference to which the
insurance claim has been raised by the respondent has no direct
35
nexus with the profit generating activity and the insurance cover
was obtained only to cover the loss, if any, being suffered on
account of theft or by natural calamity and the order passed by the
National Commission dated 3
rd
December, 2004 is the subject
matter of challenge in appeal before us.
56.In the light of the judgment passed by us today in Civil Appeal
Nos.53525353 of 2007 (National Insurance Co. Ltd. v. Harsolia
Motors and Others), the present appeal is without substance and is
accordingly dismissed. No costs.
57.The complaint is restored on the file of the State Commission
and the same be adjudicated on its own merits in accordance with
law and may be decided as expeditiously as possible, but in no case
later than one year.
58.Pending application(s), if any, shall stand disposed of.
CIVIL APPEAL NO(S).2821 OF 2012 – National Insurance Co. Ltd.
v. M/s Ankur and Another.
59.The judgment under appeal is dated 15
th
December, 2010
passed by the National Commission.
36
60.Brief facts of the case are that the respondent is engaged in
the business of garments in wholesale, who took a standard fire
and peril policy effective for the period from 6
th
January, 2006 to 5
th
January, 2007 for a total sum of Rs.60,00,000/. There was a fire
on 28
th
December, 2006 resulting in damage to the factory of the
respondent. The appellant appointed spot surveyor, M/s Apex
Surveyors Pvt. Ltd. for final survey, who submitted its report on
22
nd
December, 2008 assessing the loss to the tune of
Rs.53,17,790/ after deducting salvage amount of Rs.1 lakh and
factoring sound stock being saved after the fire at Rs.51,969/. The
appellant claimed that the respondent has failed to submit certain
documents to the assessor and, therefore, assessment on such
basis could be treated as void. In the meanwhile, SARFAESI
proceedings were initiated against the respondent by Canara Bank
(secured creditor).
61.While the claim of the respondent was being processed, the
respondent filed a complaint before the State Commission claiming
Rs.60,00,000/ along with interest. At this stage, the appellant
filed a preliminary objection that the respondent is not a
37
“consumer” within the definition of Section 2(1)(d) of the Act, 1986.
The State Commission at one stage had held that the respondent is
engaged in commercial activity and, therefore, is not a consumer.
The finding returned by the State Commission was reversed by the
National Commission under its order dated 15
th
December, 2012
holding that commercial entity availing its services by the insurance
company is a “consumer” in reference to the transaction in terms of
Section 2(1)(d) of the Act, 1986.
62.We have assigned detailed reasons in Civil Appeal Nos.(5352
5353 of 2007 (National Insurance Co. Ltd. v. Harsolia Motors and
Others). In the light of the judgment passed by us today in the
said appeal, the present appeal is without substance and is
accordingly dismissed. No costs.
63.The complaint is restored on the file of the State Commission
and the same be adjudicated on its own merits in accordance with
law and may be decided as expeditiously as possible, but in no case
later than one year.
64.It is brought to our notice that pursuant to order dated 11
th
May, 2011 of this Court, the appellant had deposited 50% of the
38
claim made by the respondent and the office report dated 15
th
February, 2023 indicates that an amount of Rs.59,74,814/ was
invested in the fixed deposit with the maturity date of 16
th
July,
2023. Let the amount be transferred to the State Commission and
the money invested in fixed deposit shall continue and may be
invested in an interestbearing account on automatic renewal basis
and the parties shall abide by the orders of the State Commission.
65.Pending application(s), if any, shall stand disposed of.
CIVIL APPEAL NO(S).3350 OF 2018 – The Bank of New York
Mellon (Formerly The Bank of New York) v. M/s METCO Export
International and Others.
66.The appellant has filed the present appeal by special leave
against the judgment and order dated 6
th
February, 2018 passed by
the National Commission.
67.Brief facts of the case are that respondent no.1 entered into a
transaction with a third party (an Italian buyer of respondent no.1)
for supply of five containers of sesame seeds and oil seeds for USD
141,375. In relation to this transaction, the services of Federal
Bank Ltd. (respondent no.2) were availed to send the invoice, bills of
39
lading, surveyor’s certificate, bills of exchange, phytosanitary
certificate and other related documents (four documents) to the
buyer’s banker in Italy. Respondent no.2 engaged the services of
the appellant to get export documents delivered to the buyer’s
banker in Italy which in turn engaged services of a courier company
(respondent no.3). The export documents were lost in transit.
68.Respondent no.1 filed a consumer complaint before the State
Commission against the appellant, respondent no.2 and respondent
no.3. The complaint was dismissed on the premise that respondent
no.1 is not a consumer as defined under Section 2(1)(d) of the Act,
1986 by an order dated 10
th
December, 2013, that became the
subject matter of challenge at the instance of respondent no.1 in
appeal before the National Commission relying on the judgment in
Laxmi Engineering Works (supra) and taking note of the
judgment in the case of M/s Harsolia Motors, the National
Commission recorded a finding that the dispatch of papers by the
bank which were lost in transit and never received by the Italian
buyer per se is not related to generate any profit to the respondent
40
as the actual profit will come from the sale of the exported goods
which has no nexus to profit generating activity.
69.After we have heard counsel for the parties and considering
the view expressed by this Court in Civil Appeal Nos.53525353 of
2007 (National Insurance Co. Ltd. v. Harsolia Motors and Others),
the present appeal is without substance and is accordingly
dismissed. No costs.
70.The complaint is restored on the file of the State Commission
and the same be adjudicated on its own merits in accordance with
law and may be decided as expeditiously as possible, but in no case
later than one year.
71.Pending application(s), if any, shall stand disposed of.
CIVIL APPEAL NO(S). OF 2023
(@ SPECIAL LEAVE PETITION (CIVIL) NO(S).1039 OF 2020) –
IFFCO Tokio General Insurance Company Limited v. M/s OPG
Energy (P) Ltd.
72.Leave granted.
73.The present appeal has been filed by special leave to appeal
against the judgment and order dated 27
th
September, 2019 passed
by the National Commission.
41
74.We have heard counsel for the parties and taking note of the
fact initially an exparte order was passed by the Consumer Forum
against the appellant on 12
th
September, 2014, pursuant to which
the appellant was directed to pay Rs.9,57,903/ with interest @ 9%
per annum from the date of complaint i.e., 8
th
April, 2011 and
Rs.5,000/ towards litigation. The appeal/revision filed at the
instance of the appellant before the State Commission and National
Commission, both were dismissed by orders dated 25
th
June, 2019
and 27
th
September, 2019 respectively.
75.After we have heard counsel for the parties, find no reason to
interfere with the impugned order and the same is accordingly
dismissed. No costs.
76.Pending application(s), if any, shall stand disposed of.
………………………J.
(AJAY RASTOGI)
……………………….J.
42
(C.T. RAVIKUMAR)
NEW DELHI;
APRIL 13, 2023.
43
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