The distinction between ‘commercial purpose’ and ‘non-commercial’ purpose is so indeterminate that it becomes difficult to reach a definite conclusion. To award compensation to the right people, a precise and restrictive meaning is needed to remove the ambivalence.
The main objective of the Consumer Protection Act, 1986 is to ensure better protection of consumers. But in reality it poses a problem in identifying a consumer in the first place.
The most problematic SECTION in the Consumer Protection Act is section 2(i)(d) which defines the word consumer. However, after the amendment of Act 62/2002 of the Consumer Protection Act, 1986, which came into force with effect from 15.03.2003, the definition of the expression “consumer” as defined in Section 2(i) (d) of the Consumer Protection Act, 1986, has been changed and it excludes from its purview a person who obtains such goods for resale or for any commercial purpose.
This means that the people who purchase 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”.
Further, an explanation is added to the definition which reads, “for the purpose of this clause ‘commercial purpose’ does not include use by any person of goods bought and used by him and services availed by him exclusively for the purpose of earning his livelihood by means of self employment”.
However, as far as the words “commercial purpose” and livelihood” are concerned, neither of these terms has been defined under the Consumer Protection Act or under the Rules framed thereafter. Therefore, interpretation of these words is to be seen as per the facts of the case and on the basis of the judgments that have been elucidated by the courts in a variety of cases. The explanation to the term depends on the subjective interpretation of the facts of the case and hence is relative.
The term is still a highly controversial subject and the lack of clarity on the interpretation of the term in the Act has led to a plethora of contradicting notions and judgements from time to time on this issue.
In Kalpavruksha Charitable Trust v. Toshniwal Brothers (Bombay) Pvt Ltd 2000
In Morgan Stanley Mutual Fund v. Kartick Das (1994 (4) SCC 225), a Bench of Hon’ble Supreme Court stated the meaning of the expression “consumer” in the following words:
“The consumer as the terms implies is one who consumes. As per the definition, consumer is the one who purchases goods for private use or consumption. The meaning of the word ‘consumer’ is broadly stated in the above definition so as to include anyone who consumes goods or services at the end of the chain of production. The comprehensive definition aims at covering every man who pays money as the price or cost of goods and services. “
Furthermore, in the case of Laxmi Engineering Works v. PSG Industrial Institute, 1995 AIR 1428 the question relating to the status of a buyer of goods for resale or commercial purpose was considered at great length by the Apex Court. The brief facts of the case were that the appellant, i.e. Laxmi Engineering Works, was a proprietary concern established under the Employment Promotion Programme. The appellant had placed an order with the respondent, ie, P S G Industrial Institute for supply of a Universal Turning Central Machine.
The appellant’s case was that the respondent not only supplied the machinery six months beyond the stipulated date but supplied a defective machine due to which he suffered serious financial losses. Accordingly, he lodged a complaint before the Maharashtra Consumer Disputes Redressal Commission claiming compensation on several counts from the respondent. The respondent, interalia, raised an objection that since the appellant had purchased the machine for commercial purposes he was not a consumer within the meaning of the said expression as defined in Sec. 2(1)(d) of the Act.
The Apex Court observed that the explanation in the section clarified that in certain situations, purchase of goods for commercial purpose would not take the purchaser out of the definition of ‘consumer’. If the commercial use is by the purchaser himself for the purpose of earning his livelihood by means of selfemployment, such a purchaser of goods is a consumer. In the present case, the goods were bought by the Complainant but he subsequently used it for the purpose of his business of manufacturing machine parts on a large scale for the purpose of earning profits and that cannot be held to mean that he used the goods for his livelihood.
It is obvious that the Parliament intended to restrict the benefits of the act to ordinary consumers purchasing goods either for their own consumption or even for use in a small venture that they may have embarked upon in order to make a living as distinct from large scale manufacturing or processing activity carried out for profit.
The Supreme Court has also clarified that in the illustration given above, that if the purchaser himself worked on a typewriter or plied the car as a taxi himself, he did not cease to be a consumer. In other words, if the buyer of goods uses them himself, i.e. by self-employment, 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 Consumer Protection Act. In such a case, all he has to do is to prove that the goods in question, though purchased for commercial purpose, are used/operated personally by the buyer himself which is a rather difficult task to accomplish.
On the contrary, post the aforesaid amendment, in Action Construction Equipment Ltd & Anr vs Bablu Mridha 4(2012)CPJ245(NC), the Hon’ble National Commission has said that the law on this point is well settled, that when a buyer takes the assistance of one or two persons to assist/help him in operating the machine, he does not cease to be a consumer. Since, in the present case also, respondent is having only two machines and same are being used by the respondent for earning his livelihood, by no stretch it can be said that respondent is engaged in commercial activities. As against this a person who purchases an auto-rickshaw, 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 self-employment” 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.
Whereas, in Madan Kumar Singh Vs. District Magistrate, Sultanpur and others reported in [(2009) 9 SCC 79] while considering whether the appointment of a driver to ply a truck would take the owner of the truck out of the definition of consumer, the Court held that the appellant purchasing a truck to earn his livelihood by means of self-employment, notwithstanding appointment of a driver to ply the said truck, would still be a consumer.
The Hon’ble National Commission in Bhardwaj Industries Vs. Premier Limited Ltd. & Another I (2014) CPJ 146 (NC) held that M/S Bharadwaj Industries was already into the business of manufacturing product before placing order of the machine in question on the opposite parties and the machine in question was purchased not for the purpose of starting the business exclusively for earning livelihood by means of self-employment, but it was actually purchased for increasing the product line of the complainant with a view to expand the business and therefore, the complainant did not fall within the exception as carved out by the explanation to Section 2(1)(d) of the Consumer Protection Act, 1986.
The study of these and similar cases reveals that the term ‘commercial purpose’ has been interpreted liberally against consumer’s interest. Sometimes the distinction between ‘commercial purpose’ and ‘non-commercial’ purpose is so indeterminate that it becomes difficult to reach a definite conclusion. It may cause confusion and defeat the purpose of the Act under certain situations, for example, a fridge, heater, water cooler etc. may be purchased and installed in a residence will not be considered a commercial purpose and thus covered by the act but the same installed in a factory, a shop, a doctor’s clinic or a lawyer’s chamber/firm will become an acquisition for commercial purpose and thereby outside the purview of the Act.
Therefore, we have to differentiate between two similar yet slightly obscure categories of people, the first one being those who purchase goods and use them as means of earning a livelihood by utilizing them for personal use only. These people will be covered by the Act. Whereas the second kind is those who purchase goods but their usage has a close nexus with commercial activity that is inclusive of profit making. These people cannot be termed as Consumers by the very logic of the act.
The Consumer Protection Act 1986 was amended thrice earlier in 1991, 1993 and 2002. Moreover, a new Consumer Protection Bill (No. 226 of 2015), was introduced in Lok Sabha on August 10, 2015 by the Minister of Consumer Affairs, Food and Public Distribution. The Bill, likely to replace the Consumer Protection Act, 1986, proposes to add Explanation 2 to section 2(i)(d) of the Consumer Protection Act to clarify that e-commerce transactions are also covered under it. To avoid the anomalous situations regarding the definition of commercial purpose, we await that a precise and restrictive meaning is also given to this section to remove the ambivalence so that the right people can be awarded compensation by the courts
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