2024 INSC 403

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Reportable

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NOS. of 2024

(@ SPECIAL LEAVE PETITION (CIVIL) NO. 15290 OF 2021)

SHRIRAM CHITS (INDIA) PRIVATE LIMITED

EARLIER KNOWN AS SHRIRAM

CHITS (K) PVT. LTD …APPELLANT(S)

VERSUS

RAGHACHAND ASSOCIATES …RESPONDENT(S)

WITH

CIVIL APPEAL NO.____ ____ OF 2024

(@SPECIAL LEAVE PETITION(CIVIL) NO. 16430/2021)

WITH

CIVIL APPEAL NO.____ ____ OF 2024

(@SPECIAL LEAVE PETITION(CIVIL) NO. 16513/2021)

WITH

CIVIL APPEAL NO.___ _____ OF 2024

(@SPECIAL LEAVE PETITION(CIVIL) NO. 15827/2021)

WITH

CIVIL APPEAL NO.___ _____ OF 2024

(@SPECIAL LEAVE PETITION(CIVIL) NO. 16811/2021)

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WITH

CIVIL APPEAL NO.___ _____ OF 2024

(@SPECIAL LEAVE PETITION(CIVIL) NO. 16718/2021)

WITH

CIVIL APPEAL NO.____ ____ OF 2024

(@SPECIAL LEAVE PETITION(CIVIL) NO. 16815/2021)

AND

CIVIL APPEAL NO.___ _____ OF 2024

(@SPECIAL LEAVE PETITION(CIVIL) NO. 15489/2021)

J U D G E M E N T

Aravind Kumar, J.

1. Leave granted.

2. The appellant (‘OP’/‘service provider’, used interchangeably) has

challenged the order dated 10.03.2021 of the National Consumer Disputes

Redressal Commission, New Delhi (NCDRC) in these appeals. The

respondent (complainant) had successfully redressed its consumer

grievance, originally, before the Principal Consumer Disputes Redressal for

Bangalore Urban District, at Bangalore (‘District Forum’). The service

provider was unsuccessful in upsetting the order of the District Forum before

the State Consumer Disputes Redressal Commission, Bangalore (‘State

Forum’) as well as the NCDRC. That is how this matter has come before us.

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3. The service provider is a registered Chit Fund company engaged in

Chit business. Admittedly, the complainant had subscribed to certain chits

in the said business. The subscription was made in the chit group

53005/Ticket No.9 for a chit value of Rs.1,00,000/- payable at the rate of

Rs.2500/- per month for a period of 40 months.

4. It is the case of the complainant that the OP had illegally stopped the

chit business in the year 1996. The complainant requested the OP to repay

the chit amount deposited until stoppage of the business. The OP refused to

re-pay the subscription amount since, according to it, the complainant owed

certain dues to it and therefore, it adjusted the subscription amount against

pending dues of the complainant.

5. Initially, the complainant sought to redress its grievance relating to

non-refund of the subscription amount, before the authority constituted

under the Chit Funds Act 1982.

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Thereafter, the OP filed WP No.22568/2012

with 9 other connected writ petitions against the order of the Additional

Registrar. Whereas the Complainant also filed WP No.17045/2014 with 9

other connected writ petitions questioning the finding with regards to the

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The complainant had filed 10 cases before the Assistant Registrar of Co-operative Societies i.e., Dispute

No.1062/2004-05 to 1071/2004-05, for recovery of adjusted amount, whereunder the Assistant Registrar

passed an award and directed the OP to pay the amount to complainant. Against the said order OP

unsuccessfully challenged the orders in appeals before Additional Registrar of Co-operative Societies,

Aliaskar Road, Bangalore, in appeal No.33/CAP/2009-10 to No.42/CAP/2009-10. The Additional

Registrar directed the opposite party to pay the award amount on the ground that said chit groups did not

come under the Chit Fund Act.

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maintainability under the Chit Funds Act. On 16.11.2015, the High Court

directed the complainant to approach the Consumer Forum and held that said

cases were not maintainable under the Chit Funds Act.

6. It is against this background that the complaint comes to be filed

before the District Forum alleging that the illegal termination of the chit fund

business and consequent non-refund of the subscription amount, resulted in

deficiency of service. The prayer in the complaint was for a direction to be

issued to the OP to refund Rs.18,750/- along with future interest at the rate

of 18% p.a.

7. In the written version, the OP, apart from contesting the claim on

merits, raised a preliminary objection that the complaint is not maintainable

since the complainant does not qualify the definition of a ‘consumer’.

According to the OP, the service obtained by the complainant was for a

commercial purpose, and by that fact, the complainant would stand excluded

from availing any remedy under the Consumer Protection Act, 1986. To

demonstrate that the service was obtained for a commercial purpose, the OP

relied on two circumstances: (a) the statement in the complainant that there

was an ‘understanding between complainant and opposite party to promote

chit business’; (b) findings

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of an internal audit conducted by the OP.

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As per the Internal Audit, the Complainant held 1023 prized chits, and 1043 non-prized chits. The report

also mentions various correspondences between the complainant and OP with regards to the increasing

disparity between the total liability of the fund, and the paid-up value of the non-prized chits. As per the

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8. Against the said pleadings available on record, the District Forum

proceeded to frame the following issue:

I. Whether the Complainant has proved the alleged deficiency in

service by the Opposite Party?

II. If so, to what relief the Complainant is entitled?

9. There was no specific issue framed on the preliminary question as

to whether the complainant fell within the definition of consumer as

understood under Section 2 (1) (d) of the Act of 1986. However, the District

Forum did address itself, though incorrectly, to the objection of the OP that

the complaint was not maintainable. Instead of examining whether the

service availed on behalf of the complainant was for a commercial purpose,

the District Forum determined whether the complainant fell within the

definition of a “person” as defined in Section 2 (1)(m) of the Act. On merits,

it found that there was, in fact, ‘deficiency in service’ and ordered for refund

of the claimed amount with interest of 18% p.a.

10. In appeal, the State Forum has cursorily found that the District

Forum was correct in concluding that there was deficiency in service, on

merits. Nothing has been said, however, as regards the challenge to the

audit report, the balance liability amounted to Rs. 1.86 crores. It was stated that owing non-payment of

outstanding arrears, the foreman in accordance with Section 28 and Section 29 of the Chit Fund Act is

bound to remove the defaulted non-prized subscriber to keep the chit running, hence the defaulted non-

prized tickets maintained by Complainant were removed, and the paid amounts were adjusted against

arrears in the prized chits.

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maintainability of the complaint even though a specific ground was taken in

the memorandum of appeal towards that end.

11. The NCDRC has agreed with the State Forum and District Forum on

the merits of the issue and found no reason to interfere with the ‘well

appraised detailed order’ of the District Forum. It noted that there was no

necessity to reappreciate the evidence de novo since the forums below had

properly appreciated the issue in dispute. On the maintainability issue, the

NCDRC appears to have mirrored the approach of the District Forum.

Instead of examining whether the service obtained by the complainant was

for a ‘commercial purpose’, it examined the question of whether the

complainant falls within the definition of ‘person’. Neither was such an

objection raised by the OP in the version originally submitted before the

District Forum nor was such a contention orally taken before the NCDRC.

We fail to understand how the NCDRC failed to grasp the exact nature of

the maintainability challenge. Be that as it may.

12. It is against the above backdrop that we are called upon to determine

the present lis. Instead of remanding the matter back to the Consumer Forum

we intend to decide the maintainability challenge here itself. The question

that has eluded three judicial forums has now to be settled once and for all.

That question simply is: Whether the service obtained by the complainant

was for a commercial purpose?

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13. Section 2 (7) of the Act defines a consumer to mean:

Section 2 (7) "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 service 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 service 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

service for any commercial purpose.

Explanation.—For the purposes of this clause,—

(a) the expression "commercial purpose" does not

include use by a person of goods bought and used by him

exclusively for the purpose of earning his livelihood, by

means of self-employment;

(b) the expressions "buys any goods" and "hires or

avails any services" includes offline or online transactions

through electronic means or by teleshopping or direct selling

or multi-level marketing;

14. The provision as it stands now (as extracted above) was not how it

appeared when it was grafted in the original Act. The definition of

‘consumer’ has undergone textual amendments in 1993 and in 2002. For

ease of reference, the evolutionary history of the provision from its origin

until the 2019 Act is captured in the table below:

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Consumer

Protection Act

1986

The Consumer

Protection

(Amendment) Act,

1993

The Consumer

Protection

(Amendment) Act,

2002

Consumer Protection Act

2019

“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 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

“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

payment, when such

services are availed of

with the approval of the

first mentioned person.

“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 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

(7) "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

service 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 service 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 service

for any commercial

purpose.

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person who hires

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

Explanation.—For

the purposes of sub-

clause (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 self-

employment;

for any commercial

purpose.

Explanation.—For the

purposes of this clause,

“commercial purpose”

does not include use by a

person of goods bought

and used by him and

services availed by him

exclusively for the

purposes of earning his

livelihood by means of

self-employment;

Explanation. —For the

purposes of this clause,

—

(a) the expression

"commercial purpose"

does not include use by a

person of goods bought

and used by him

exclusively for the

purpose of earning his

livelihood, by means of

self-employment;

(b) the expressions "buys

any goods" and "hires or

avails any services"

includes offline or online

transactions through

electronic means or by

teleshopping or direct

selling or multi-level

marketing;

15. Structurally, there are three parts to the definition of a consumer. We

can deconstruct Section 2(7)(i) as a matter of illustration.

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The first part sets

out the jurisdictional prerequisites for a person to qualify as a consumer –

there must be purchase of goods, for consideration

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. The second part is an

‘exclusion clause’ [‘carve out’] which has the effect of excluding the person

from the definition of a consumer. The carve out applies if the person has

obtained goods for the purpose of ‘resale’ or for a ‘commercial purpose’.

The third part is an exception to the exclusion clause – it relates to

Explanation (a) to Section 2(7) which limits the scope of ‘commercial

purpose’. According to the said explanation, the expression, ‘commercial

3

The logic can be identically extended to Section 2(7)(ii)

4

The consideration may have been paid or partly paid or agreed to be paid in future.

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purpose’ does not include persons who bought goods ‘exclusively for the

purpose of earning his livelihood, by means of self-employment’. The

significance of this structural break down will be discussed shortly.

16. The carve out existed as part of the original enactment. However, the

Explanation to Section 2(7) was inserted by amendment in 1993.

17. Judicial experience has shown us that the service providers most

often than not take up a plea in their written version that the service

obtained/goods bought was for a commercial purpose. For, if they succeed

in their plea, the complainant is excluded from availing any benefit under

the Act. According to Section 11, the District Forum has jurisdiction to

entertain complaints ‘where the value of the goods or services and the

compensation, if any, claimed does not exceed rupees twenty lakhs’. The

expression ‘complaint’ is defined in Section 2(1)(7)(c) to mean any

allegation made in writing by a complainant relating to certain enumerated

subjects. A complainant is defined 2(1)(b) to mean a consumer, among other

entities. Therefore, to file a complaint, one must be a complainant and for

one to be a complainant, he must be a consumer. If a person fails to come

within the definition of a consumer, he cannot be a complainant

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and

therefore, such person cannot file a complaint under the Act.

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Complainant is defined under Section 2 (1) (b) of the Act. A complainant means – (i) a consumer; or (ii)

any voluntary consumer association registered under the Companies Act,1956 or under any other law for

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18. In the facts of the instant case, the OP had raised a plea in its version

that the complainant does not satisfy the definition of consumer since the

service was obtained for a commercial purpose. Sri Shailesh Madiyal,

learned Senior Advocate for the OP has argued vehemently that the

complainant has not pleaded let alone prove that the services availed by it

was for securing the livelihood of the complainant by means of self-

employment. According to Sri Shailesh Madiyal, the onus to prove that

services were availed for earning livelihood rests on the complainant. In

support of his submission, he has relied on Laxmi Engineering Works –

(1995) 3 SCC 583; Leelavathi Kirtilal Medical Trust v. Unique Shanti

Developers – (2020) 2 SCC 265; Cheema Engineering Services (1997) 1

SCC 131 and; Paramount Digital Lab (2018) 14 SCC 81.

19. Before we deal with the contention of Sri Shailesh Madiyal, it would

be necessary to set out the manner in which consumer forums must decide

technical pleas raised by service providers to the effect that the services

obtained/goods bought was for a commercial purpose and, therefore, the

complaint filed on behalf of such persons are not maintainable. The crucial

step in deciding such pleas would turn on the manner in which the issues are

framed. Unless the burden of proof is properly cast on the relevant party,

the time being in force; or (iii) the Central Government or any State Government, who or which makes a

complaint.

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the consumer forum would not be in a position to arrive at proper decision.

Therefore, we proceed to provide some guidance on how the issues must be

framed and the manner in which the evidence must be appreciated.

20. As we have shown above, the definition of consumer has three parts.

The significance of deconstructing the definition into three parts was for the

purpose of explaining on whom lies the onus to prove each of the different

parts. There can hardly be any dispute that the onus of proving the first part

i.e. that the person had bought goods/availed services for a consideration,

rests on the complainant himself. The carve out clause, in the second part, is

invoked by the service providers to exclude the complainants from availing

benefits under the Act. The onus of proving that the person falls within the

carve out must necessarily rest on the service provider and not the

complainant. This is in sync with the general principle embodied in Section

101 and 102 of the Evidence Act that ‘one who pleads must prove’. Since it

is always the service provider who pleads that the service was obtained for

a commercial purpose, the onus of proving the same would have to be borne

by it. Further, it cannot be forgotten that the Consumer Protection Act is a

consumer-friendly and beneficial legislation intended to address grievances

of consumers.

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Moreover, a negative burden cannot be placed on the

6

National Insurance Co. Ltd. v. Harsolia Motors and Ors. (2023) 8 SCC 362.

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complainant to show that the service available was not for a commercial

purpose.

21. Having held that the onus to prove that the service was obtained for

a commercial purpose is on the service provider, we may clarify the standard

of proof that has to be met in order to discharge the onus. The standard of

proof has to be measured against a ‘preponderance of probabilities’. The test

to determine whether service obtained qualified as a commercial purpose is

no longer res integra in view of this Court’s decision in Lilavathi v. Kiritlal

(supra). Para 19 sets out the principles on which it must be determined

whether the onus of proving ‘commercial purpose’ has been properly

discharged by the service provider.

22. If and only if, the service provider discharges its onus of showing

that the service was availed, in fact for a commercial purpose, does the onus

shift back to the complainant to bring its case within the third part, i.e. the

Explanation (a) to Section 2(7) – to show that the service was obtained

exclusively for the purpose of earning its livelihood by means of self-

employment.

23. In this background, we must consider the plea of Sri Shailesh

Madiyal that the complainant has not pleaded nor proved that the service

was obtained for earning his livelihood through the means of self-

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employment. His argument relates to the third part of the definition of

consumer. The question of inquiring into the third part will only arise if the

service provider succeeds in crossing the second part by discharging its onus

and proving that the service obtained was for a commercial purpose. Unless

the service provider discharges its onus, the onus does not shift back to the

complainant to show that the service obtained was exclusively for earning

its livelihood through the means of self-employment. In the facts of this case,

the OP has merely pleaded in its version that the service was obtained for a

commercial purpose. No evidence has been led to probabilise its case other

than merely restating its claim on affidavit. It is now well too settled that a

plea without proof and proof without plea is no evidence in the eyes of law.

24. We do not wish to address ourselves to the merits of the issue since

three Forums have concurred in their finding that there was proved

deficiency of service.

25. Accordingly, we dismiss the appeals.

….…………………………….J.

(Pamidighantam Sri Narasimha)

…….………………………….J.

(Aravind Kumar)

New Delhi,

May 10, 2024