Summary
A company in the import-export business bought a software licence to automate its export and import documentation. The purchase had a nexus with generating profit and so was for a commercial purpose; the company was not a "consumer" under Section 2(1)(d) of the Consumer Protection Act, 1986, and its complaint was rightly held not maintainable.
Issues
- Whether a company that purchased a software licence and development services to automate its business processes is a "consumer" under Section 2(1)(d) of the Consumer Protection Act, 1986.
- Whether such a purchase, made for self-use and not for resale, falls outside "commercial purpose" or within the Explanation on self-employment.
Provisions considered
- Section 2(1)(d) and Explanation, Consumer Protection Act, 1986The definition excludes a person who obtains goods or avails services for any commercial purpose; the Explanation saves use exclusively for earning a livelihood by self-employment. The Court held that a company buying software to automate its business to augment profits acts for a commercial purpose and is outside the Explanation. (¶¶ 11, 12, 16, 18, 22, 25, 27, 28)
- Section 2(1)(m), Consumer Protection Act, 1986Following Karnataka Power Transmission Corporation v. Ashok Iron Works, the inclusive definition of "person" covers an incorporated company, so a company can in principle be a consumer. (¶¶ 13, 14)
Held
- An incorporated company can be a consumer under Section 2(1)(d) read with Section 2(1)(m), since the definition of "person" is inclusive. (¶ 14)
- Whether a purchase is for a commercial purpose turns on its dominant purpose and its nexus with profit generation, judged on the facts, including the nature of the goods or services and why they were acquired; the identity of the buyer and the value of the transaction are not conclusive. (¶¶ 15, 16, 25)
- A self-employed individual buying goods for self-use to earn a livelihood may fall within the Explanation, but a company buying software to automate its processes aims to maximise profits and does not; that the software was for the company's own use makes no material difference. Sunil Kohli was distinguished as a case of unemployed individuals seeking self-employment. (¶¶ 18, 20, 22)
- Harsolia Motors does not hold that purchases for better management of a business are non-commercial. Its ratio concerns insurance, whose dominant object is protection against loss rather than profit; the other illustrations in it are not part of the ratio, and a transaction with a nexus to profit generation is for a commercial purpose. (¶¶ 25, 26)
- The appellant's purchase of the software, intended to automate profit-linked processes, reduce costs and maximise profits, was for a commercial purpose, so the appellant was not a consumer qua that transaction. (¶¶ 27, 28)
Result
Appeal dismissed; orders of the State Commission and NCDRC holding the complaint not maintainable upheld; no order as to costs.