Full Judgment Text
REPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL NO. 12322 OF 2016
Lilavati Kirtilal Mehta Medical Trust …Appellant
Versus
M/S Unique Shanti Developers & Ors. …
Respondents
J U D G M E N T
MOHAN M. SHANTANAGOUDAR, J.
1. This appeal arises out of judgment of the National Consumer
Disputes Redressal Commission (‘National Commission’) dated
25.10.2016 dismissing the Appellant’s Review Application No.
76/2016 against the order dated 1.3.2016 by which the National
Commission dismissed the Appellant’s Consumer Complaint No.
Signature Not Verified
117/2016.
Digitally signed by
GULSHAN KUMAR
ARORA
Date: 2019.11.14
15:50:45 IST
Reason:
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2. The Appellant’s case is that Respondent No. 1/Opposite Party
No. 1 had developed two buildings ‘Madhuvan’ with thirty two ‘1
BHK’ flats in colony ‘Shanti Park’ in Thane, Maharashtra. Out of
these the Appellant/complainant trust took possession of 29 flats
for provision of hostel facilities to nurses employed by Lilavati
Hospital, which is run by the Appellant trust. 29 agreements to
sell were executed in respect of each flat on 25.11.1995, which
were registered on 16.3.1996, and entire consideration amount
was paid for the same. The architect issued completion certificate
in respect of the flats on 17.2.1997. The flats were used for the
purpose of hostel facilities till 2002. However, within 2-3 years of
completion of the project, because of alleged poor building
quality, the structure became dilapidated. The appellant vacated
the flats in 2002 and since 2004, the flats are lying unused.
In the meanwhile, an interim Board of Trustees was
constituted by this Court by order dated 21.5.2014 in SLP No.
3772/2014, which is a separate litigation concerning dispute over
control of the appellant trust between different groups of trustees.
The aforesaid interim Board of Trustees called for a structural
report from M/s Raje Consultants, which submitted their report in
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September 2015 finding that the cost of repairs would be more
than the cost of reconstruction. The appellant also claims that
Respondent No. 1 obtained the occupation certificate for the flats
by playing fraud upon the local municipal corporation. Hence the
appellant filed Consumer Complaint No. 117/2016 before the
National Commission claiming Rs 7,65,95,400/- in compensation
on account of annual loss of rent from 2002 to 2015, cost of
reconstruction of building ‘Madhuvan’ and future loss of rent of
Rs 35,00,000/- per year, along with Rs 5,00,000/- in damages.
Initially, the National Commission by order dated 1.3.2016
dismissed the complaint as barred by limitation on the ground
that cause of action for raising the complaint arose in 2004, the
year since when the flats are lying unused; however the
complaint was filed in 2016. Under Section 24A of the Consumer
Protection Act, 1986 (‘1986 Act’) the period of limitation for filing
a complaint is two years, hence the complaint was time-barred.
The National Commission further held that the pending litigation
between the trustees in SLP No. 3772/2014 (supra) is not
sufficient to explain the delay as the dispute concerning
constitution of Board of Trustees of the appellant trust arose in
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2014 whereas it was not the appellant’s case that there was no
competent Board of Trustees in 2004 when the cause of action
arose.
Subsequently the National Commission in the impugned
judgment, hearing Review Application No. 76 of 2016 against the
order dated 1.3.2016 (supra), found that it had incorrectly
recorded in the aforesaid order that ‘conveyance deeds’ of the 29
flats were registered on 16.3.1996, whereas what was registered
by the appellants was actually agreements to sell. Hence on
account of this error on the face of the record, the National
Commission recalled the order dated 1.3.2016. However the
National Commission again proceeded to dismiss the complaint,
this time on the ground that the appellant trust was not a
‘consumer’ within the meaning of Section 2(1)(d) of the 1986 Act
as the aforesaid section excludes a person who obtains goods and
services for a ‘commercial purpose’; that since providing hostel
facility to the nurses is directly connected to the commercial
purpose of running the hospital, and is consideration for the work
done by them in the hospital, the appellant would not be a
‘consumer’ under the 1986 Act. Hence this appeal.
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3. Section 2(1)(d) of the 1986 Act defines ‘consumer’ as
follows:
“(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 prom-
ised, 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 for any
commercial purposes.
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.”
(emphasis supplied)
The above Explanation clause was added to Section 2(1)(d)
by way of Ordinance No. 24 of 1993 (subsequently replaced by
Amendment Act No. 50 of 1993), with effect from 18.6.1993.
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Amendment Act No. 50 of 1993 also added ‘housing construction’
to the definition of ‘service’ under Section 2(o) of the 1986 Act.
In the present case, it is not denied that the Appellant has
validly taken possession of the flats constructed by Respondent
No. 1 and paid consideration for the same, and can therefore be
said to have availed of its housing construction services. This
Court has held in Spring Meadows Hospital v. Harjol
Ahluwalia through K.S. Ahluwalia , I (1998) CPJ 1 (SC), that the
person who hires the service for a beneficiary can also be
included in the definition of ‘consumer’ under Section 2(1)(d)(ii).
Though that case was in the context of parents hiring the services
of a hospital for their minor child, the same principle may also be
extended to a case such as the present one where an employer
such as the Appellant trust hires certain services for the welfare
of its employees. Hence, though possession of the flats was
acquired for the purpose of providing housing facility to the
hospital nurses, the Appellant is entitled to claim against
Respondent No. 1 as a consumer.
The only issue which arises for our consideration therefore is
whether the purchase of flats for the purpose of providing
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accommodation to nurses employed by the Appellant trust’s
hospital qualifies as a ‘purchase of services for a commercial
purpose’; and consequently whether the Appellant is excluded
from the definition of ‘consumer’ under Section 2(1)(d) of the
1986 Act?
Learned senior counsel for the Appellant, Mr. Guru Krishna
Kumar argued in reliance upon this Court’s decisions in Laxmi
Engineering Works v. P.S.G. Industrial Institute , (1995) 3
SCC 583, and Paramount Digital Colour Lab v. Agfa India
Private Limited , (2018) 14 SCC 81, that the Court has to look at
the dominant purpose for which the purchase is made in order to
decide whether it was for a ‘commercial purpose.’ In this case,
the dominant purpose for purchasing the flats was to provide
housing to the nurses and was not linked to the commercial
operations of the hospital.
Per contra, learned senior counsel for the Respondents Ms.
Kiran Suri argued that under the Explanation to Section 2(1)(d),
only goods and services availed “exclusively for the purpose of
earning livelihood by self-employment” are excluded from the
ambit of ‘commercial purpose’. In the present case, the hostel
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facilities in the flats constructed by Respondent No. 1 were for the
purpose of providing comfortable accommodation to the nurses,
which in turn would increase their efficiency and lead to provision
of better services to the hospital. Hence the flats were indirectly
connected to the commercial purpose of increasing profits for the
hospital. Such a purchase would not fall in the category of
‘earning livelihood by self-employment’. Learned senior counsel
relied on this Court’s decisions in Laxmi Engineering (supra),
Cheema Engineering Services v. Rajan Singh , (1997) 1 SCC
131, and Kalpavruksha Charitable Trust v. Toshniwal
Brothers (Bombay) Pvt. Ltd., (2000) 1 SCC 512, to buttress
her argument.
4. Taking into account the material on record and the relevant
jurisprudence on this issue, we are of the considered opinion that
the purchase of flats by the Appellant for the purpose of providing
hostel facilities to the hospital nurses does not qualify as meant
for a ‘commercial purpose’. Though the term ‘commercial
purpose’ as referred to under Section 2(1)(d) has nowhere been
defined under the provisions of the 1986 Act, this Court has
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expounded upon it based on its lateral dictionary meaning in
various decisions.
In Laxmi Engineering (supra), which is one of the leading
authorities on this point, a two-Judge Bench of this Court
elucidated upon the meaning of ‘commercial purpose’ as follows:
“10. A review of the provisions of the Act discloses that
the quasi-judicial bodies/authorities/agencies created
by the Act known as District Forums, State
Commissions and the National Commission are not
courts though invested with some of the powers of a
civil court. They are quasi-judicial tribunals brought into
existence to render inexpensive and speedy remedies
to consumers…The idea was to help the consumers get
justice and fair treatment in the matter of goods and
services purchased and availed by them in a market
dominated by large trading and manufacturing bodies.
Indeed, the entire Act revolves round the consumer and
is designed to protect his interest. The Act provides for
"business-to-consumer' disputes and not for "business-
to-business" disputes. This scheme of the Act, in our
opinion, is relevant to and helps in interpreting the
words that fall for consideration in this appeal.
11. 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
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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…
…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.”
(emphasis supplied)
In the aforementioned discussion in Laxmi Engineering , this
Court relied upon Synco Textiles Pvt. Ltd. v. Greaves Cotton
and Company Limited , (1991) 1 CPJ 499. In Synco Textiles , a
4 Member-Bench of the National Commission headed by V.
Balakrishna Eradi J., expounded upon the meaning of the term
‘commercial purpose’, prior to the insertion of the Explanation
clause to Section 2(1)(d) of the 1986 Act:
“3…The words “for any commercial purpose” are wide
enough to take in all cases where goods are purchased
for being used in any activity directly intended to
generate profit…
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4. Going by the plain dictionary meaning of the words
used in the definition section the intention of
Parliament must be understood to be to exclude from
the scope of the expression 'consumer' any person who
buys goods for the purpose of their being used in any
activity engaged on a large scale for the purpose of
making profit. It is obvious that Parliament intended to
restrict the benefits of the Act to ordinary consumers
purchasing goods either for their own consumption or
even for use in some small venture which they may
have embarked upon in order to make a living as
distinct from large scale manufacturing or processing
activity carried on for profit. In order that exclusion
clause should apply it is however necessary that there
should be a close nexus between the transaction of
purchase of goods and the large scale activity carried
on for earning profit.
6. There is a close and direct nexus between the
purpose of purchase of the generating sets and the
commercial activity of manufacturing of edible oils for
trade carried on by the appellant company, since the
generating sets were intended to be used, as and when
the need arose, for generating electric current for
manufacture of edible oils for the purpose of trade. We
do not, therefore, find any reason to interfere with the
view taken by the State Commission that the appellant
is not a ‘consumer’.”
Recently, a two-Judge bench of this Court, comprising of one of
us, in Paramount Digital Colour Lab (supra) has re-
emphasized the importance of there being a ‘close nexus’
between the purpose for which the good or service is availed of
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and a large-scale profit activity in order to classify such a
transaction as commercial in nature, as illustrated below:
“12…It is therefore clear, that despite “commercial
activity”, whether a person would fall within the
definition of “consumer” or not would be a question of
fact in every case. Such question of fact ought to be
decided in the facts and circumstances of each case.
17. Since there is nothing on record to show that they
wanted the machine to be installed for a commercial
purpose and not exclusively for the purposes of earning
their livelihood by means of self-employment, the
National Commission was not justified in concluding
that the appellants have utilised the services of an
operator or a helper to run a commercial venture. One
machine does not need many operators or helpers to
complete the work entrusted. Since the appellants were
two partners, they must have been doing the work on
their own, of course, may be with the aid of a helper or
an operator. The machine would not have been used in
a large-scale profit-making activity but, on the contrary,
the appellants purchased the machine for their own
utility, personal handling and for their small venture
which they had embarked upon to make a livelihood.
The same is distinct from large-scale manufacturing or
processing activity carried on for huge profits. There is
no close nexus between the transaction of purchase of
the machine and the alleged large-scale activity carried
on for earning profit. Since the appellants had got no
employment and they were unemployed graduates,
that too without finances, it is but natural for them to
raise a loan to start the business of photography on a
small scale for earning their livelihood.”
Therefore this Court in Paramount Digital Colour Lab
(supra) held that the purchase of a machine for appellants’
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photography business, which was a small-scale business meant
for earning their livelihood, would not be interpreted as being for
a ‘commercial purpose.’
5. It is true that the aforementioned decisions were rendered in
the context of deciding whether the goods or services availed of
in the facts of those cases were for a commercial purpose or
exclusively for the purpose of self-employment. This does not
mean, however, that in every case a negative test has to be
adopted wherein any activity that does not fall within the ambit of
‘earning livelihood by means of self-employment’ would
necessarily be for a commercial purpose. We reject Respondent
No. 1’s argument in this regard. The Explanation clause to Section
2(1)(d) of the 1986 Act is only clarificatory in nature, as was
highlighted by this Court in Laxmi Engineering (supra):
“14. Yet another clarification; the Explanation, in our
opinion is only explanatory; it is more in the nature of a
clarification a fact which would become evident if one
examines the definition (minus the explanation) in the
context and scheme of the enactment. As indicated
earlier, the explanation broadly affirms the decisions of
the National Commission. It merely makes explicit what
was implicit in the Act. It is not as if the law is changed
by the said explanation; it has been merely made
clearer.”
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Therefore the Explanation clause only re-affirms the
definition of ‘consumer’ as it already exists. Ultimately, whether
or not a person is a consumer or whether an activity is meant for
a commercial purpose will depend upon the facts and
circumstances of each case. It may be the case that a person who
engages in commercial activities has purchased a good or availed
of a service for their personal use and consumption, or for the
personal use of a beneficiary, and such purchase is not linked to
their ordinary profit-generating activities or for creation of self-
employment. Such a person may still claim to be a ‘consumer.’
For example, a large corporation may hire the services of a
caterer or a 5-star hotel for hosting a function for its employees
and their families. If there is any deficiency in service, the service-
provider cannot claim that merely because the person availing of
the service is a profit-generating entity, and because such
transaction does not relate to generation of livelihood through
self-employment, they do not fall under the definition of a
‘consumer.’ A commercial entity may also be a consumer
depending upon the facts of the case. It is not the identity of the
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person but the purpose for which the transaction is made which is
relevant.
6. With regard to goods and services availed of by employers
for the benefit of their employees, it is particularly important to
note that we live in a socialist economy, wherein the ethos
dictates that employers are obligated to make provisions for the
welfare of their employees. No doubt, welfare measures
undertaken by employers may increase workers’ health and
efficiency, and therefore improve the employing entity’s overall
productivity. However this is a duty to be shared by all employer
organisations and not merely those looking to increase their
productivity/profits. This obligation exists irrespective of how
much profit or turnover the organization generates in a year,
though the degree to which it extends may differ depending upon
the financial capacity of the employer.
Hence private corporate bodies such as the Appellant trust
may engage the services of third parties for the purpose of
providing perquisites to their employees. For example, an
employer may book flight tickets or train tickets for an employee
so as to facilitate their travel in the ordinary course of business. If
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any negligence occurs resulting in injury to the employee or their
property, the airline/railway company cannot disclaim liability on
the ground that the activity was carried out for a ‘commercial
purpose’.
As discussed earlier, if in all such cases the third party
service-provider disclaims liability before consumer forums on the
ground that the hirer of the service is engaged in trade and
commerce, it will open a Pandora’s box wherein the employer as
well as the employees will not have any remedy. This would
defeat the object of providing a speedy remedy to consumers, as
outlined in the provisions of the 1986 Act. Further, setting such a
precedent may discourage employers from undertaking to
provide any facilities for their employees. Hence, it is necessary
to clarify that the provision of such services would not usually be
included in the definition of ‘commercial purpose.’
7. To summarize from the above discussion, though a straight-
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’:
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(i) 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 business-to-business
transactions between commercial entities.
(ii) The purchase of the good or service should have a close and
direct nexus with a profit-generating activity.
(iii) 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.
(iv) 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 self-
employment’ need not be looked into.
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8. Applying these principles to the facts of the present case, we
find that there is no direct nexus between the purchase of flats by
the Appellant trust and its profit generating activities. The flats
were not occupied for undertaking any medical/diagnostic
facilities within the hospital but for accommodating the nurses
employed by the hospital. Moreover, the flats were being
provided to the nurses without any rent. It is not the
Respondents’ case that the Appellant was generating any surplus
from occupying the flats or engaging in buying and selling of flats.
It may be the case that provision of comfortable hostel
facilities to the nurses, generates a feeling of gratitude and
loyalty towards their employer and improves their overall
efficiency, which indirectly results in the hospital gaining more
repute and therefore generating more income. However, this is a
matter of conjecture and there is no direct causal chain which can
be drawn between provision of accommodation to hospital
employees and increase in the Appellant’s profits.
The decision in Kalpavruksha Charitable Trust (supra),
relied upon by the Respondents, does not support them inasmuch
as it was on a different set of facts. In that case, this Court held
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that the purchase of CT scan machines by a diagnostic centre
would be included within the meaning of ‘commercial purpose’.
There is an apparent direct nexus between the purchase of the
machines, medical equipment, etc. and the running of a
diagnostic centre/hospital. The present case does not involve any
such purchase.
Further, applying the dominant purpose test, it cannot be
said that the provision of such hostel facilities is integral to the
Appellant trust’s commercial activities. The paramount object of
providing such facilities is to cater to the needs of nurses and
combat the challenges faced by those who lack permanent
accommodation in the city, so as to recompense the nurses for
the pivotal role which they play as co-ordinators and custodians of
patients’ care.
Nurses help in the speedy recovery of patients and are a
vital resource for hospitals and medical centres inasmuch as they
are the only resource available 24/7 for catering to patients’
needs. They are directly involved in all aspects of hospital service
quality, be it in the form of monitoring patients’ recovery, bedside
medication management or assistance with surgeries and other
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major operations. In some situations they are responsible for
performing immediate interventions to prevent medical
complications. They are on the frontlines of administering and
evaluating treatment, and provide invaluable emotional support
as they are best placed to understand the complexities and
implications of having a serious illness.
Hence the provision of hostel facilities to nurses so as to
facilitate better medical care is a positive duty enjoined upon the
hospital so as to maintain the beneficial effects of the curative
care efforts undertaken by it. Such a duty exists irrespective of
the surplus or turnover generated by the hospital, and hence is
not even remotely related to the object of earning profits or for
any commercial use as envisaged under Section 2(1)(d).
9. Hence we find that the Appellant trust is a ‘consumer’ under
Section 2(1)(d) of the 1986 Act for the present transaction under
consideration. In light of the above discussion, we consider it
appropriate to remand the matter to the National Commission for
consideration in accordance with law. The appeal is allowed and
restored before the National Commission, and the impugned
judgment is set aside, in the aforesaid terms. The parties are
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relegated to record their evidence before the National
Commission, and the National Commission is requested to hear
the matter on merits and decide the same expeditiously, at an
early date.
...........................................J.
(Mohan M. Shantanagoudar)
...........................................J.
(Ajay Rastogi)
New Delhi;
November 14, 2019.
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