Summary
A vehicle dealer whose showroom was burnt in the 2002 Godhra riots filed a consumer complaint against its insurer's repudiation; the State Commission held a business entity was not a 'consumer' but the National Commission reversed. In this and connected insurers' appeals the Supreme Court held that the Consumer Protection Act, 1986 does not exclude commercial enterprises as such; the test is whether the goods or services were obtained for a commercial purpose, that is, with a close and direct nexus to profit generation. A contract of insurance is one of indemnity for a contingent loss and involves no profit generation, so taking a policy, even by a commercial enterprise, is not hiring a service for a commercial purpose and the insured was a consumer. The Commercial Courts Act, 2015 operates in a different sphere and is not rendered nugatory.
Issues
- Whether an insurance policy taken by a commercial enterprise to cover its business premises or stock amounts to hiring services 'for any commercial purpose' so as to exclude the insured from the definition of 'consumer' in Section 2(1)(d) of the Consumer Protection Act, 1986.
- Whether treating insurance claims by business entities as consumer disputes renders the Commercial Courts Act, 2015 nugatory.
Provisions considered
- Section 2(1)(d) with Explanation, Consumer Protection Act, 1986A person who buys goods or hires services for a commercial purpose is excluded; whether a purpose is commercial is a question of fact turning on whether the transaction has a close and direct nexus with profit generation, not on the identity of the purchaser. (¶¶ 25, 26, 27, 30, 32, 37, 39, 42)
- Sections 2(1)(m) and 2(1)(o), Consumer Protection Act, 1986'Person' inclusively covers firms and, as held in Karnataka Power Transmission v. Ashok Iron Works, companies, without distinction of size; 'service' expressly includes insurance, so a firm with a deficiency-in-insurance grievance may invoke the Act if it is otherwise a consumer. (¶¶ 25, 28, 36, 38)
- Section 2(1)(c)(xx), Commercial Courts Act, 2015Though insurance disputes are commercial disputes under this Act, the two statutes have different scope and remedial mechanisms with no internal correlation, so consumer jurisdiction over insurance claims does not render it nugatory. (¶¶ 9, 47)
Held
- The Act is a social benefit legislation to be construed liberally; there is no exclusion of a commercial enterprise or a firm from the definition of 'consumer' merely because it is a commercial entity. What matters is the transaction in question: whether the goods or services were obtained for a purpose having a close and direct nexus with a profit-generating activity, applying the principles in Laxmi Engineering Works, Lilavati Kirtilal Mehta Medical Trust and Shrikant G. Mantri. (¶¶ 21, 24, 30, 32, 35, 36, 37, 42)
- A contract of insurance is one of indemnity against loss from an unknown or contingent event and the insured can never be more than fully indemnified; hiring an insurance policy to cover envisaged risks is an act of indemnifying loss with no element of profit generation, so the insured dealer's claim had no close or direct nexus with its profit-generating activity and it was a consumer under Section 2(1)(d). This remains illustrative and each case must be examined on its own facts. (¶¶ 43, 44, 45, 46)
- By way of illustration, a manufacturer's purchase of raw material, a charitable trust's purchase of a CT scan machine for paid scans, or a hospital hiring a doctor is for a commercial purpose, while purchase of a refrigerator or air-conditioner for an office with no nexus to profit, or availing medical services for one's ailment, is not. (¶¶ 39, 40, 41)
- The Consumer Protection Act and the Commercial Courts Act have different scope, ambit and remedial mechanisms and operate in different spheres; the inclusion of insurance claims within the former does not render the latter nugatory. (¶ 47)
Result
Appeals dismissed; the National Commission's orders holding the insured business entities to be consumers under Section 2(1)(d) affirmed; complaints restored to the respective State Commissions to be decided on merits within one year; in the Ankur matter the insurer's deposit to be transferred to the State Commission and kept in an interest-bearing account; the IFFCO Tokio appeal also dismissed on merits; no costs.