On a cursory reading of the provisions under the Consumer protection Act, 1986, one might be tempted to answer the question "Who is a consumer" by pointing out the definition of 'consumer' given under the section 2(1)(d) of the Consumer Protection Act, 1986 (the Act). While that might be enough for some of the cases arising under the Act, there is still ambiguity present in parts of the definition.
The definition while in essence provides that any person who consumes goods or services will be treated as a consumer for the purposes of, it creates an exception for 'commercial purpose.' In other words, any goods or services used for 'commercial purposes' shall keep one out of the definition of 'consumer.' However, what can be termed as commercial purpose is not provided for in the Act.
Further, while 'commercial purpose' is an exception to consumer purposes without any guidance, a bit more ambiguity is created by another exception created against 'commercial purpose'. The explanation provided in the definition of 'consumer' provides that "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.
By means of this article the authors tries to uncover the ambit of 'commercial purpose' and tries to bring clarity on these terms. According to the definition, in brief, a consumer means:
The explanation was added 1993 by the Consumer Protection (Amendment) Act of 1993, which was later amended in 2002 to include services in its ambit,
Thus, 'Commercial Purpose' acts as an exception to the general definition of 'consumer' given in the act and using/availing the goods/services 'for livelihood by means of self-employment' acts as the exception to the exception.
The ambiguity arises when one tries to focus on what exactly is the intention of the legislature in use of the terms 'commercial purpose' 'livelihood' and 'self-employment' and the interpretation of the explanation to the section as a whole.
In many cases, after the amendment of the Act, the courts have attempted to shed some light on the subject.
In the case of Madan Kumar Singh(D) Thr Lrs vs Distt. Magistrate, Sultanpur4 the Hon'ble Supreme Court observed that the legislative intent behind the amendments was to keep out its scope of the definition anyone who buys the goods for the purpose of resale or with the intention of using them to carry on an activity of earning.
In another case, namely Synco Textile Private Ltd vs Greaves Cotton and Co Ltd.5, the National Commission laid down that 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. Synco Textile's case implicates that "commercial purpose" should be distinguished from commercial organization or commercial activity. It further explains that:
"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".
The emphasis in this decision was on the commercial activity being of 'large scale'.
While dealing with the ambit and the scope of the term "Commercial Purpose" the Hon'ble Supreme Court in Lakshmi Engineering works Vs PSG Industries6, held that the persons 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 in the same case the Hon'ble court laid down the test of 'close and direct nexus with the commercial activity'. The court held that the immediate purpose as distinct from the ultimate purpose of purchase, sale in the same form or after conversion and a direct nexus with profit or loss would be the determinants of the character of a transaction – whether it is for a "commercial purpose" or not. Even in this landmark case the Court stopped short of defining the terms involved and held that:
"whether the purpose for which a person has bought goods is a "commercial purpose" within the meaning of the definition of expression "consumer" in Section 2(d) of the Act is always a question of fact to be decided in the facts and circumstances of each case."
In the case of Madan Kumar Singh(D) (supra), the Hon'ble Supreme Court restated the aforementioned determinants and held that the:
"buyers of goods or commodities for "self-consumption" in economic activities in which they are engaged would be consumers as defined in the Act."
In this regard, it would be pertinent to discuss the case of Raipur Madras Road Lines vs P.S. Steel Tubes Limited & Anr7 decided by Chhattisgarh SCDRC. In this case the question was whether the complainant, who had availed the services of a transporter to send his goods to his customers, would fall under the definition of 'consumer'. The State commission held that only if the purpose of hiring or availing the services of the transporter was for earning profit and connected with or engaged in commerce and thus had profit as its main aim, only then will it be said to be availed for a commercial purpose. The commission further went on to say:
"But, after the transaction of sale, as averred, if purchase order was placed by someone to the complainant and if the goods were to be sent to some other destination by the transport service by hiring of goods carriage, on payment, then it can, by no stretch of imagination, be said that hiring of transport service or availment of transport service was for commercial purpose because by hiring transport service or by availment of transport service, no extra profit was being earned by the complainant, than the price of such goods, which were already sold."
But even after the above discussion it is evident that the courts have restrained themselves from providing a straight formula to determine who will fall under the category of 'consumer' with respect to commercial purposes. This reluctance of the courts seems to stem from the fact that any precise definition might inevitably end up excluding some people who ought to fall within the definition of 'consumer'.
"A person who purchases an auto-rickshaw to ply it himself on hire for earning his livelihood would be a consumer. Similarly, a purchaser of a truck who purchases it for plying it as a public carrier by himself would be a consumer. A person who purchases a lathe machine or other machine to operate it himself for earning his livelihood would be a consumer. (In the above illustrations, if such buyer takes the assistance of one or two persons to assist / help him in operating the vehicle or machinery, he does not cease to be consumer). 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"
"the word "self-employment" is not defined. Therefore, it is a matter of evidence. Unless there is evidence and on consideration thereof it is concluded that the machine was used only for self-employment to earn his livelihood without a sense of commercial purpose by employing on regular basis the employee or workmen for trade in the manufacture and sale of bricks, it would be for self-employment. Manufacture and sale of bricks in a commercial way may also be to earn livelihood, but "merely earning livelihood in commercial business", does not mean that it is not for commercial purpose. Self-employment connotes altogether a different concept, namely, he alone uses the machinery purchased for the purpose of manufacture by employing himself in working out or producing the goods for earning his livelihood." Here 'him' was interpreted to include his family.
While all this discussion should in some way bring clarity and end the ambiguity, the fact is far from it. There is clearly a general trend that we get to see in the jurisprudence, viz.:
Although, these are the trends, the Courts have time and again iterated that each case has to be dealt on the basis of facts and that no strict formula is applicable.
While size matters, how big or small a business can be to be classified as 'for profit' or 'for livelihood' is still very much a grey area. There is no clarity on what will be the dividing line between what is for livelihood or for profit. Such lack of clarity has resulted in the complaints of many small or average sized entrepreneurial ventures getting dismissed. Sellers and service providers have come in the habit of citing this amendment to try and wriggle out of complaints against them, which ultimately defeats the purpose of the statute.
If the purpose of including this provision was to exclude big businesses and corporate entities from taking the benefit of this act, a better solution to the problem could have been a turnover based exclusion of entities buying goods or availing services. Another which may be proposed is to amend the act so as to include the definition of 'livelihood' and 'self-employment'. But one can surely see the hesitation of the lawmakers in that regard as any sufficiently precise definition would end up excluding from its ambit some who deserved to be classified as 'consumer'.