National Insurance Co. Ltd. v. Harsolia Motors and Others
RASTOGI, J.
CIVIL APPEAL NO(S).5352-5353 OF 2007
1. The assail in the present appeals by special leave is to judgment
and order passed by the National Consumer Disputes Redressal
Commission (hereinafter “National Commission”) dated 3rd December,
2004, whereby the National Commission, while reversing the finding of
the Gujarat State Consumer Disputes Redressal Commission (hereinafter
“State Commission”), regarding maintainability of the complaint filed at
the instance of the respondent under the Consumer Protection Act, 1986
(hereinafter “Act, 1986”) held that a person who takes insurance policy
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to cover the envisaged risk does not take the policy for the commercial
purpose. Policy is only for indemnification of an actual loss and is not
intended to generate profits and finally held that the respondent (insured)
was a consumer as defined under Section 2(1)(d) of the Act, 1986 and
thecomplaint filed at his instance was maintainable and be examined by
the State Commission on merits.
2. Respondent no.1 (dealer in TATA vehicles) and respondent
no.2 are the claimants. Respondent no.1 took out a fire insurance policy
with the appellant for a cover of Rs.75,38,000/- and respondent no.2 for
a cover of Rs.90 lakhs. That on 28th February, 2002, damage was caused
to the goods of respondent nos.1 and 2 due to fire (during the course of
Godhra riots). The appellant denied the claim of respondent no.1, while
admitting the claim of respondent no.2 to the extent of Rs.54,29,871/-.
The respondents filed complaint before the State Commission.
3. Respondent no.1 M/s Harsolia Motors, a commercial entity
engaged in the business of sale of vehicles, took fire insur ance policy
from the appellant insurance company covering the office, showroom,
garage, machinery lying in the showroom premises, etc. The grievance
of the respondent was that their aforesaid premises were damaged during
the Godhra riots on 28th February, 2002. A complaint was instituted by
the respondent, M/s Harsolia Motors, a partnership firm, before the State
Commission, for compensation of damage caused on the ground th at
post-Godhra incident, which took place on 27th February, 2002, riots broke
out resulting into complainant’s goods being destroyed by fire set up by
rioters on 28th February, 2002 and the respondent/complainant was entitled
to be indemnified the insured sum under the policy of insurance.
4. The State Commission held that the respondent is not covered
under the expression “consumer” as defined under Section 2(1)(d) of
the Act, 1986 and held that the complainant being a company running a
business from the premises to earn profits falls under the term “for
commercial purpose” and the complaintis not maintainable und er the
provisions of the Act, 1986.
5. On an appeal being preferred by the respondent insured before
the National Commission, the question arose as to whether the insurance
policies taken by a commercial unit could be held to be hiring of services
for commercial purpose and are hereby excluded from the provisions of
the Act, 1986 after revisiting the provisions of the Act, 1986 and the
NATIONAL INSURANCE CO. LTD. v. HARSOLIA MOTORS
AND OTHERS [AJAY RASTOGI, J.]
definition of the terms “consumer” and “service” as defined under Section
2(1)(d) and 2(1)(o) of the Act, 1986, respectively the Com mission
recorded a finding that the expression used “for any commercial purpose”
would mean that the goods purchased or services hired should be used
in any activity directly intended to generate profit and profit is the main
aim of commercial purpose, but in a case where goods purchas ed or
services hired in an activity which is not intended to generate profit, it
would not be a commercial purpose and held that a person who takes
the policy of insurance to cover the envisaged risk, for indemnification
of actual loss sufferedis not ordinarily intended to generate profits and
accordingly held that the respondent/complainant was a “cons umer”
under Section 2(1)(d) of the Act, 1986 and complaint filed at its instance
is to be examined/decided by the State Commission on its own merits
under the judgment impugned dated 3 rd December, 2004, is a subject
matter of challenge in appeal before this Court at the inst ance of the
appellant insurance company.
6. While the notices were issued by this Court on 15th April, 2005,
the operation and effect of the judgment impugned was s tayed. In
consequence thereof, the complaint filed at the instance of the respondent
has not been examined by the State Commission on merits so far.
7. The other batch of appeals which were heard along with Civil
Appeal No(s).5352-5353 of 2007 (National Insurance Co. Ltd. v. Harsolia
Motors and Others) arising from the judgment of the National
Commission, placing reliance on the impugned judgment da ted 3rd
December, 2004, applying the self-same principles are also challenged
at the instance of the appellant insurer before us.
8. The seminal issue that emanates for our consideration is whether
the insurance policy taken by the respondent (commercial enterprises)
insured amounts to hiring of services for “commercial purpose” thereby
excluded from the purview of the expression”consumer” as defined under
Section 2(1)(d) of the Act, 1986.
9. Learned counsel for the appellant submits that there cannot be
a blanket inclusion of all insurance matters within the purview of Act,
1986 and if that is being taken at the face value, it wou ld render the
provisions of the Commercial Courts Act, 2015 (hereinafter “Act, 2015”)
nugatory and submits that Section 2(1)(XX) of the Act,2015 inc ludes
insurance and re-insurance within the ambit of commercial disputes.
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10. Learned counsel further submits that law on the subject has
been examined by this Court in Laxmi Engineering Works v. P.S.G.
Industrial Institute1 and it was held that “commercial purpose” is to be
looked into, in the facts and circumstances of each case to consider the
purpose for which the goods and services are bought or availed. If it is
availed with a view to carrying out large scale commercial activity with
profit motive, then the buyer would not qualify as a consumer and the
Act, 1986 would not be applicable and the view of this Court has been
consistently affirmed in the later judgments.
11. Learned counsel further submits that the Commission in its
second last para explicitly takes the very policy of insurance within the
purview of the Act, 1986 and in sequel thereof, regardless of the nature
of transaction, whenever there is a claim for compensation in reference
to the policy of insurance, such complaints became maintainable under
the Act, 1986.
12. Learned counsel further submits that dominant purpose of
obtaining insurance contracts by the business entities is to earn profits
and thus has a close and direct nexuswith it and accordingly these entities
are not entitled to file the claim before the Consumer Cou rt seeking
summary proceedings and the present disputes are not of a small
disgruntled consumer who is seeking claim of an insurance for loss of
mobile for personal use, or of autorickshaw driver seeking cl aim for
expenses incurred for fixing a defective engine as that is covered for his
livelihood. The instant dispute pertains to large scale business entities
entering into commercial agreements with the insurance companies to
protect the risks associated in carrying out their businesses. If they are
being permitted to invoke the jurisdiction as a consumer under the Act,
1986, it will frustrate the very mandate of the legislative wisdom, pursuant
to which this Act has been enacted.
13. Learned counsel further submits that the doctrine of election
is not available to the litigant who is aggrieved by the insurance contract
as Section 2(1)(d) of the Act, 1986 and Section 2(7) of the C onsumer
Protection Act, 2019 Act specifically exclude the provisions of services
“for commercial purpose” from the ambit of consumer courts and the
only remedy lies to the commercial courts under the Act, 2015.
1 (1995) 3 SCC 583
NATIONAL INSURANCE CO. LTD. v. HARSOLIA MOTORS
AND OTHERS [AJAY RASTOGI, J.]
14. Learned counsel submits that if contention to the contrary of
insurance for commercial activities falling within the ambit of the Act,
1986 is to be accepted, then obtaining any service for any commercial
activity even for facilitating profit generation for commercial enterprise
would fall within the expression “consumer” as defined under Section
2(1)(d) of the Act, 1986and it would lead to improbability as it would go
against the basic tenets of service being used for commercial ends whose
violation give rise to civil action and not consumer redressal.
15. Learned counsel further submits that if the respo ndent’s
submission of insurance as a service availed by any person within the
meaning of the Act is accepted, this would entail an exponential growth
of consumer disputes across the country, not only would that l ead to
frustration of literal spirit and intent of the socially a nd economically
beneficial legislation, rather it would inadvertently give rise to the premiums
charged by the insurance company which would again subserve the
overall intent of the Act, as actual consumers who reg ularly avail the
services will have to pay more for the same coverage and th is can be
taken note from the Statement of Objects and Reasons which was kept
in mind for the purpose of making the amendment in the year 2002.
16. Learned counsel lastly submits that the purchase of insurance
policy has a direct nexus with the commercial activity in a large-scale
enterprise. In other words, the insurance policy indemnifies the company
against loss arising out of fire, earthquake or any other insured pe ril.
What is reimbursed by the insurance company is a loss and loss is directly
interlinked with the commerce of the company and, therefore, a complaint
seeking reimbursement of a loss would not be maintainable before the
Consumer Court if it is filed by a large-scale commercial entity like the
respondent herein andthe interpretation addressed by the National
Commission of the provisions of the Act, 1986 not only runs contrary to
the judgments of this Court, it is otherwise not legally sustainable and
deserves to be interfered by this Court.
17. Per contra, learned counsel for the respondent, submits that
the purchase of insurance policy cover is a contract of indemnification
of particular risk and not a contract of doing or not doing something to
earn profit/loss out of such act. If the contemplated risk out of particular
eventuality i.e., fire, flood, etc., does not occur, then there is no question
of encashment of policy cover, and if this happens what is payable is the
risk amount against premium paid in advance. Under the circumstances,
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the insurance policy cover is being offered/purchased not basic ally to
earn profit, but to cover the uninvited risk, hence, buying of policy cover
is not for commercial purpose even if it is purchased by commercial
enterprises and what is commercial purpose is well defined not only in
several dictionaries but also in the judgments of this Court and submitted
that it may be noticed that the Act, 1986 bars only a trans action for
“commercial purpose” but it does not bar any commercial enterprise to
be a consumer and hence the commercial enterprise can be a buyer/
consumer and can enforce its rights as a consumer, provided immediate
intent is to generate profit out of such transaction by the commercial
enterprise, as held by this Court in Madan Kumar Singh (Dead)
Through LR. v. District Magistrate, Sultanpur and Other s2.
18. Learned counsel further submits that any transactio n by
commercial enterprises even without immediate intention to make profit
cannot be regarded for “commercial purpose”, otherwise all transactions
by commercial enterprises may or may not have even remote co-relation
of generating profit will be treated for commercial pu rposes. Say, for
example, a company buying a water plant for its worke rs or for any
stranger/outsider to serve free water - or paint tins in bulk for upgrading
walls etc. have no direct effect of earning profit out of it. Thus, buying a
water plant cannot be treated for commercial purpose, otherwise virtually
all transactions by commercial enterprise will get colour of commercial
purpose and had it been such an intention of the legislature, then it would
have worded the definition of term “consumer” differently – instead of
“any person” would have used “any person other than comme rcial
enterprises”, but the statute in its wisdom has allowed to cover commercial
transaction with commercial purpose. Therefore, the transact ions by
the commercial enterprises per se cannot be considered as an exclusion
altogether under the Act, 1986.
19. We have heard learned counsel for the parties and with their
assistance perused the material available on record.
20. Before we proceed to examine the issue raised f or our
consideration, it will be apposite to take a bird’s eye-view of the Act, 1986.
21. The Act, 1986 is a social benefit-oriented legislation a nd,
therefore, the Court has to adopt a constructive liberal approach while
construing the provisions of the Act. To begin with the Preamble of the
2 (2009) 9 SCC 79
NATIONAL INSURANCE CO. LTD. v. HARSOLIA MOTORS
AND OTHERS [AJAY RASTOGI, J.]
Act, 1986 which can afford useful assistance to ascertain the legislative
intention, it was enacted to provide for the protection of the interests of
consumers. Use of the word “protection” furnishes key to the minds of
makers of the Act. Various definitions and provisions which elaborately
attempt to achieve this objective have to be construed in this light without
departing from the settled law that a Preamble cannot control otherwise
plain meaning of a provision.
22. In fact, the law meets long felt necessity of protecting the
common man from such wrong for which the remedy under ordinary
law for various reasons has become illusory. Various legislat ions and
regulations permitting the State to intervene and protect interests of the
consumers have become a haven for unscrupulous ones as the
enforcement machinery either does not move or it moves ineffectively
and inefficiently for reasons which are not necessary to be stated.
23. The importance of the Act lies in promoting welfare of the
society by enabling the consumer to participate directly in the market
economy. A scrutiny of various definitions such as “consumer”, “service”,
“trader”, “unfair trade practice” indicates that legislature has attempted
to widen the ambit and reach of the Act. Each of these definitions are in
two parts, one explanatory and the other inclusive. The explanatory or
the main part itself uses expressions of amplitude indicating clearly its
wide sweep within its ambit to widen such things which otherwise would
have been beyond its natural import.
24. The provisions of the Act, 1986 thus have to be construed in
favour of the consumer to achieve the purpose of enactment as i t is a
social benefit-oriented legislation. The primary duty of the Court/
Commission while construing the provisions of such an Act is to adopt a
constructive approach subject to that it should not do violence t o the
language of the provisions and is not contrary to attempted objective of
the enactment.
25. Section 2(1)(d) defines “consumer”, Section 2(1)(m) defines
“a person” and Section 2(1)(o) defines “service”, which are relevant to
examine the moot question raised for our consideration are reproduced
hereunder:
“2. Definitions. - In this Act, unless the context otherwise
requires,-
……..
459
(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 whi ch
has been paid or promised or partly paid and partly promised,
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 payments, when such services are availed of with
the approval of the first-mentioned person;
Explanation: For the purposes of sub-clause (i), “commercial
purpose” does not include use by a consumer of goods
bought and used by him exclusively for the purpose of
earning his livelihood, by means of self-employment;
……
(m) “person” includes-
(i) a firm whether registered or not;
(ii) a Hindu undivided family;
(iii) a co-operative society;
(iv) every other association of persons whether registered under
the Societies Registration Act, 1860 (22 of 1860) or not;
…….
(o) “service” means service of any description which is made
available to potential users and includes the provision of facilities
in connection with banking, financing, insurance , transport,
processing, supply of electrical or other energy, board or lodging
or both, [housing construction], entertainment, amusement or the
NATIONAL INSURANCE CO. LTD. v. HARSOLIA MOTORS
AND OTHERS [AJAY RASTOGI, J.]
purveying of news or other information, but does not include the
rendering of any service free of charge or under a contract of
personal service.”
26. The word “consumer” is the fulcrum of the Act. Since the
Act hinges on the twin concepts of defect in goods or any deficiency in
service, a consumer is one who buys any goods or hires any serv ice.
The term “consumer” has, thus, been defined to mean a person who is –
(a) a buyer, or
(b) with the approval of the buyer, the user, of the goods in
question, or
(c) a hirer or person otherwise availing, or
(d) with the approval of such aforesaid persons, the beneficiary,
of the service or services in question
With the condition super added that such buying of the goods or
hiring or availing of any such service, is for a consideration, -
(i) paid, or
(ii) promised, or
(iii) partly paid or promised, or
(iv) covered by any system of deferred payment.
27. However, the word “consumer” so defined does not include a
person, who, in case of goods obtains such goods for resale or for any
commercial purpose, or who, in case of service, avails of such services,
for any commercial purpose. An explanation appended to the ab ove
definition states that the expression “commercial purpose” does not
include the use by the buyer of such goods or the person availing such
service or services, exclusively for the purpose of earning his livelihood
by means of self-employment.
28. It may be noticed that Section 2(1)(m) defines “person” and
includes a firm, whether registered or not, apart from other categories
without any distinction, big or small. So, as “services” de fined under
Section 2(1)(o) includes banking, insurance and if there is deficiency in
service in the matter of banking/insurance, etc., subject to the fact that
he is a consumer under Section 2(1)(d), remedy is always available to
such a consumer to invoke the jurisdiction of the Act, 1986.
461
29. This Court adverted to the concept of “consumer” as defined
under the Act, analysing the definition in the context of the Act, in
Lucknow Development Authority v. M.K. Gupta 3 held :
“3……It is in two parts. The first deals with goods and the other
with services. Both parts first declare the meaning of goods and
services by use of wide expressions. Their ambit is further enlarged
by use of inclusive clause. For instance, it is not only purchaser of
goods or hirer of services but even those who use the goods or
who are beneficiaries of services with approval of the pe rson
who purchased the goods or who hired services are included in it.
The legislature has taken precaution not only to define ‘complaint’,
‘complainant’, ‘consumer’ but even to mention in detail what would
amount to unfair trade practice by giving an elaborate definition in
clause (r) and even to define ‘defect’ and ‘deficiency’ by clauses
(f) and (g) for which a consumer can approach the Commission.
The Act thus aims to protect the economic interest of a consumer
as understood in commercial sense as a purchaser of goods a nd
in the larger sense of user of services. The common characteristics
of goods and services are that they are supplied at a pri ce to
cover the costs and generate profit or income for the seller of
goods or provider of services. But the defect in one and deficiency
in other may have to be removed and compensated differently.
The former is, normally, capable of being replaced and repaired
whereas the other may be required to be compensated by award
of the just equivalent of the value or damages for loss……”
30. Later, this Court in Laxmi Engineering Works (supra), while
dealing with the connotative expanse of the term “consumer” in the
unamended form and the explanation added to the exp ression
“Consumer”by an amendment, ruled that such explanation is clarificatory
in nature and taking note of the explanation added by the amendment
Act, 1993 extensively examined the definition of the term “consumer”
as under:-
“11. Now coming back to the definition of the expressio n
‘consumer’ in Section 2( d), a consumer means insofar as is
relevant for the purpose of this appeal, (i) a person who buys any
goods for consideration; it is immaterial whether the consideration
3 (1994) 1 SCC 243
NATIONAL INSURANCE CO. LTD. v. HARSOLIA MOTORS
AND OTHERS [AJAY RASTOGI, J.]
is paid or promised, or partly paid and partly promised, or whether
the payment of consideration is deferred; (ii) a person who uses
such goods with the approval of the person who buys such goods
for consideration; (iii) but does not include a person who buys
such goods for resale or for any commercial purpose . The
expression ‘resale’ is clear enough. Controversy has, however ,
arisen with respect to meaning of the expression “commerc ial
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 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. Broadly affirming the said view and
more particularly with a view to obviate any confusion - the
expression “large scale” is not a very precise expr ession -
Parliament stepped in and added the explanation to Section 2(d)(i)
by Ordinance/Amendment Act, 1993. The explanation excludes
certain purposes from the purview of the expression “commercial
purpose” - a case of exception to an exception. Let us elaborate:
a person who buys a typewriter or a car and uses them for h is
personal use is certainly a consumer but a person who buys a
typewriter or a car for typing others’ work for consideratio n or
for plying the car as a taxi can be said to be using the typewriter/
car for a commercial purpose. The explanation however clarifies
that in certain situations, purchase of goods for “commerc ial
purpose” would not yet take the purchaser out of the definition of
expression ‘consumer’. If the commercial use is by the purchaser
himself for the purpose of earning his livelihood by means of self-
employment, such purchaser of goods is yet a ‘consumer’. In the
illustration given above, if the purchaser himself wo rks on
typewriter or plies the car as a taxi himself, he does not cease to
be a consumer. In other words, if the buyer of goods uses them
463
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 Act. The explana tion
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. A few more illustrations would serv e to
emphasise what we say. A person who purchases an au to-
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 a consumer.) As against this a pe rson
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 se lf-
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.
and after a fair analysis of the definition “consumer ” post-
amendment 1993 finally held as under:
“21. We must, therefore, hold that:
(i) The explanation added by the Consumer Protection
(Amendment) Act 50 of 1993 (replacing Ordinance 24 of 1993)
with effect from 18-6-1993 is clarificatory in nature and applies
to all pending proceedings.
(ii) Whether the purpose for which a person has bought goods is
a “commercial purpose” within the meaning of the definition of
NATIONAL INSURANCE CO. LTD. v. HARSOLIA MOTORS
AND OTHERS [AJAY RASTOGI, J.]
expression ‘consumer’ in Section 2( d) of the Act is always a
question of fact to be decided in the facts and circumsta nces of
each case.
(iii) A person who buys goods and uses them himself, exclusively
for the purpose of earning his livelihood, by means of self-
employment is within the definition of the expressi on
‘consumer’.”
31. The exposition of law on the subject was further considered
by this Court in Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti
Developers and Others4in which one of us (Rastogi, J.) was a member
and the question arose for consideration was whether the purch ase of
flats for the purpose of providing accommodation to nurses employed by
the Lilavati Kirtilal Mehta Medical Trust hospital qualifies a purchase of
services for commercial purpose and whether the Hospital Tru st was
excluded from the definition of “consumer” under Section 2(1)(d) of the
Act, 1986, this Court after revisiting the scheme of the Act , 1986 and
taking note of the law of precedence in Laxmi Engineering Works
(supra) of which a reference has been made and placing reliance on the
judgment of this Court in Paramount Digital Colour Lab and Others
v. AGFA India Private Limited and Others5 held that a person whether
or not a consumer or other activities meant for commercial purpose will
always depend upon the facts and circumstances of each ca se.
32. It may be a case that a person who is engaged in commercial
activities has purchased goods or availed of service for his personal use
or consumption or for the personal use of a beneficiary and such purchase
is not linked to their ordinary profits generating activities or for creation
of self-employment, such a person may still claim to be a consumer and
after discussion of various illustrations summarized the discussion after
taking note of the broad principles that were culled out for determination
whether the activity or transaction is for a commercial purpose, held as
under:
“19. To summarise from the above discussion, though a strait
jacket formula cannot be adopted in every case, the followi ng
broad principles can be culled out for determining whether a n
activity or transaction is “for a commercial purpose”:
4 (2020) 2 SCC 265
5 (2018) 14 SCC 81
465
19.1. 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.
19.2. The purchase of the good or service should have a close
and direct nexus with a profit-generating activity.
19.3. 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 the ir
beneficiary.
19.4. 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.”
33. This Court noticed that the hostel facilities were provided to
the nurses employed by Lilavati hospital but after sometime of
completion of the project because of alleged poor building quality, the
structure became dilapidated and the nursing staff had to vacate the
flats being used by them and a consumer complaint filed by the Lilavati
hospital for compensation on account of annual loss of rent was
maintainable and whether the Trust was a consumer und er Section
2(1)(d) of the Act.
34. In Lilavati Kirtilal Mehta Medical Trust (supra), this Court
observed that there is no nexus between the purchase of flats by the
appellant Trust and its profit generating activity as th e flats were not
occupied for undertaking any medical/diagnostic facilities within the
hospital, but for accommodating the nurses employed by the hospital. In
the given circumstances, it has nothing to do with earing of pr ofits in
providing facilities to the nurses and held that the Trust is a “consumer”
under Section 2(1)(d) of the Act, 1986 for the tran saction under
consideration.
NATIONAL INSURANCE CO. LTD. v. HARSOLIA MOTORS
AND OTHERS [AJAY RASTOGI, J.]
35. Thus, what is important is the transaction in reference to which
the claim has been filed under the Act, 1986 by a person who c laims
himself to be a “consumer” covered under Section 2(1)(d) of th e Act,
1986, such exposition of law on the subject has been further reiterated
by this Court recently in Shrikant G. Mantri v. Punjab National Bank6
and after the analysis on the subject and taking note of the judgment of
this Court in Lilavati Kirtilal Mehta Medical Trust (supra), of which
reference has been made, examined the case on the facts in ques tion
and recorded a finding that the transaction in question would fall within
the definition of the term “consumer” or “services” for the purpose of
invoking jurisdiction under the Act, 1986.
36. Thus, what is culled out is that there is no such exclusion from
the definition of the term “consumer” either to a commercial enterprise
or to a person who is covered under the expression “person” defined in
Section 2(1)(m) of the Act, 1986 merely because it is a com mercial
enterprise. To the contrary, a firm whether registered or not is a person
who can always invoke the jurisdiction of the Act, 1986 provided it falls
within the scope and ambit of the expression “consumer” a s defined
under Section 2(1)(d) of the Act, 1986.
37. Applying the above principles to the present case, what needs
to be determined is whether the insurance service has a close and direct
nexus with the profit generating activity and 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. The
fact that the insured is a commercial enterprise is unrelated to the
determination of whether the insurance policy shall be counte d as a
commercial purpose within the purview of Section 2(1)(d) of the Act.
38. In the case of Karnataka Power Transmission Corporation
and Another v. Ashok Iron Works Private Limited 7, this Court while
answering the question in the affirmative observed :
“17. It goes without saying that interpretation of a wo rd or
expression must depend on the text and the context. The resort to
the word “includes” by the legislature often shows the intention
of the legislature that it wanted to give extensive and enl arged
meaning to such expression. Sometimes, however, the context
6 (2022) 5 SCC 42
7 (2009) 3 SCC 240
467
may suggest that word “includes” may have been designed to
mean “means”. The setting, context and object of an enactment
may provide sufficient guidance for interpretation of the w ord
“includes” for the purposes of such enactment.
18. Section 2(1)(m) which enumerates four categories, namely,
(i) a firm whether registered or not;
(ii) a Hindu Undivided Family;
(iii) a cooperative society; and
(iv) every other association of persons whether registered under
the Societies Registration Act, 1860 (21 of 1860) or not
while defining “person” cannot be held to be restrictiv e and
confined to these four categories as it is not said in terms that
“person” shall mean one or other of the things which are
enumerated, but that it shall “include” them.
19. The General Clauses Act, 1897 in Section 3(42) defin es
“person”:
“3. (42) ‘person’ shall include any company or association or body
of individuals, whether incorporated or not;”
20. Section 3 of the 1986 Act upon which reliance is plac ed by
learned counsel for KPTC provides that the provisions of the
Act are in addition to and not in derogation of any other law for
the time being in force. This provision instead of h elping the
contention of KPTC would rather suggest that the acce ss to the
remedy provided to (sic under) the Act of 1986 is an addition to
the provisions of any other law for the time being in force. It
does not in any way give any clue to restrict the definitio n of
“person”.
21. Section 2(1)(m), is beyond all questions an interpretation clause,
and must have been intended by the legislature to be tak en into
account in construing the expression “person” as it occurs i n
Section 2(1)(d). While defining “person” in Section 2(1)(m), the
legislature never intended to exclude a juristic person like company.
As a matter of fact, the four categories by way of enume ration
mentioned therein is indicative, Categories (i), (ii) and (iv) being
unincorporate and Category ( iii) corporate, of its intention to
NATIONAL INSURANCE CO. LTD. v. HARSOLIA MOTORS
AND OTHERS [AJAY RASTOGI, J.]
include body corporate as well as body unincorporat e. The
definition of “person” in Section 2(1)( m) is inclusive and not
exhaustive. It does not appear to us to admit of any doubt tha t
company is a person within the meaning of Section 2(1)(d) read
with Section 2(1)(m) and we hold accordingly.”
39. Applying the aforesaid test, two things are culled out; (i)
whether the goods are purchased for resale or for commercial purpose;
or (ii) whether the services are availed for any comme rcial purpose.
The two-fold classification is commercial purpose and non-commercial
purpose. If the goods are purchased for resale or for commercial purpose,
then such consumer would be excluded from the coverage of the Act ,
1986. For example, if a manufacturer who is producing product A, for
such production he may be required to purchase articles which may be
raw material, then purchase of such articles would be for c ommercial
purpose. As against this, if the same manufacturer purchases a
refrigerator, television or air-conditioner for his use at his residence or
even for his office has no direct or indirect nexus to generate profits, it
cannot be held to be for commercial purpose and for afore-stated reason
he is qualified to approach the Consumer Forum under the Act, 1986.
40. Similarly, a hospital which hires services of a medical
practitioner, it would be a commercial purpose, but if a p erson avails
such services for his ailment, it would be held to be a non-commercial
purpose. Taking a wide meaning of the words “for any comme rcial
purpose”, it would mean that the goods purchased or services hire d
should be used in any activity directly intended to generate profit. Profit
is the main aim of commercial purpose, but in a case where goods
purchased or services hired is an activity, which is not directly intended
to generate profit, it would not be a commercial purpose.
41. In other words, to make it further clear, let us have cer tain
illustrations, as to whether the transaction falls for commercial purpose
or whether the complainant can be held to be a “consumer” within the
scope and ambit of Act, 1986.
(i) A CT scan machine was purchased by a Charitable Trust
and that was found to be defective, the question raised
whether the machinery was purchased for a commercial
purpose and whether the appellant was a consumer. From
the narration of facts, this Court in Kalpavruksha
469
Charitable Trust v. Toshniwal Brothers (Bombay) Pvt.
Ltd. and Another 8held that the machine was purchased
by the Charitable Trust for commercial purpose as every
person who takes a CT scan has to pay for it and the services
rendered are not free and thus the Trust was not a consumer.
(ii) In Rajeev Metal Works and Others v. Mineral & Metal
Trading Corporation of India Ltd. 9, a manufacturer
imported raw material through statutory authority that acted
as a canalizing agency for manufacture and sale of the
finished product. The appellant approached the National
Commission alleging that the respondent had not supplied
the required quantity demanded by the appellant. This Court
held that the purchase was for a commercial purpose and
the manufacturer was not a “consumer” for the purpose of
the Act, 1986.
(iii) The bank which had taken bankers indemnity insurance
policy from the insurance company and suffered loss owing
to some of transactions in one of its branches, raised an
insurance claim stating that it is owing to dishonesty of
Branch Manager and the claim was repudiated by the
insurance company stating that the alleged loss was because
of some dishonesty of the Branch Manager and this being
for commercial purpose, may not be a consumer.
(iv) The complainant is a private limited company running a
diagnostic clinic and alleges that X-ray machine purchased
by the complainant from the opposite party was defective.
If an objection is raised that as machine was purchased for
commercial purpose and the complainant cannot be said to
be a consumer as defined under the Act, 1986 as he has
been employed for commercial purpose and has been
carrying out business for profit indeed the complainant is
not a consumer under the Act, 1986.
(v) A company purchased the EPBX system for the better
management of the business of the company for commercial
purpose and the complaint filed for alleged supply o f
8 (2000) 1 SCC 512
9 (1996) 9 SCC 422
NATIONAL INSURANCE CO. LTD. v. HARSOLIA MOTORS
AND OTHERS [AJAY RASTOGI, J.]
defective system may not be covered by the explanatory
clause of Section 2(1)(d) of the Act, 1986 as the transaction
has no nexus to generate profits.
42. Thus, what is finally culled out is that each case ha s to be
examined on its own facts and circumstances and what is to be examined
is whether any activity or transaction is for commercial purpose to
generate profits and there cannot be a straight-jacket form ula which
can be adopted and every case has to be examined on the broad principles
which have been laid down by this Court, of which detailed discussion
has been made.
43. Applying the above principles in the present case, what needs
to be determined is whether the insurance service had a close and direct
nexus with the profit generating activity and whether the dominant
intention or dominant purpose of the transaction was to facilitate some
kind of profit generation for the insured or to the benefic iary and our
answer is in the negative and accordingly we are of the vie w that the
complaint filed by the respondent insured herein has no close or direct
nexus with the profit generating activity and the claim of insurance is to
indemnify the loss which the respondent insured had suffered and the
Commission has rightly held that the respondent is a “consumer” under
Section 2(1)(d) of the Act, 1986.
44. We further reiterate that ordinarily the nature of the insurance
contract is always to indemnify the losses. Insurance c ontracts are
contracts of indemnity whereby one undertakes to indemnify another
against loss/damage or liability arising from an unknown or contingent
event and is applicable only to some contingency or act likely to come in
future.
45. This Court in United India Insurance Company Limited v.
Levis Strauss (India) Private Limited 10 has held as under:
“53.A contract of insurance is and always continues to be one for
indemnity of the defined loss, no more no less. In the case of
specific risks, such as those arising from loss due to fire, etc. the
insured cannot profit and take advantage by double insurance.
Long ago, Brett, LJ in Castellain v. Preston [Castellain v.
Preston, (1883) 11 QBD 380] said that : (QBD p. 386)
10 (2022) 6 SCC 1
471
“….. the contract of insurance … is a contract of indemnity.
… and that this contract means that the assured, in the case of
loss … shall be fully indemnified, but shall never be more than
fully indemnified.””
(emphasis added)
46. Thus, it can be concluded that in the instant case hiring of
insurance policy is clearly an act for indemnifying a risk of loss/damages
and there is no element of profit generation and still what has been
expressed by this Court is illustrative; it will always open to be examined
on the facts of each case, as to the transaction in reference to which the
claim has been raised has any close and direct nexu s with profit
generating activity.
47. We do not agree with the submission made on behalf of the
appellant that if insurance claims are covered under the Act, 1986, then
virtually all insurance matters will come within the purview of the Act,
1986 and this will render the Act, 2015 nugatory. In our view, both these
Acts have different scope and ambit and have differ ent remedial
mechanism, are in different sphere having no internal co-relationship.
48. Consequently, the appeals are without substance and
accordingly dismissed. No costs.
49. Let the State Commission may adjudicate the complaint of
the respondents on its own merits in accordance with law and since it is
an old matter, be decided expeditiously as possible, but in no case later
than one year.
50. Pending application(s), if any, shall stand disposed of.
CIVIL APPEAL NO(S).5354 OF 2007 – (United India
Insurance Company Limited v. M/s Diwakar Goiram Porkhayat)
51. The present appeal is directed against the order passed by the
National Commission dated 3rd December, 2004 holding that the insurance
policy taken by the respondent (commercial unit) in the facts of the case
was only to indemnity the loss which the respondent/compla inant has
suffered and the transaction in reference to which the ins urance claim
has been repudiated by the appellant, had no direct nexus with the profit
generating activity and was a “consumer” as defined under Section
2(1)(d) of the Act, 1986.
NATIONAL INSURANCE CO. LTD. v. HARSOLIA MOTORS
AND OTHERS [AJAY RASTOGI, J.]
52. The respondent/complainant (insured) is doing the business of
sale and purchase of jewellery in the name and style of “Khazana
Jewellers” who obtained a policy of insurance from the appellant for the
period 21 st October, 1999 to 20 th October, 2000 to cover the risk of
ornaments in business.
53. On 24th June, 2000, at about 7.00 a.m. when an employee of
the respondent saw that the shutter of the showroom was pa rtly open
and that was indicative of the theft and upon inspection, it was found
that goods worth Rs.20,55,200/- were stolen from the showroom.
54. On the claim being raised by the respondent to indemnify the
loss suffered, it was repudiated by the appellant and that was challenged
by the respondent by filing a consumer complaint before the State
Commission, Ahmedabad, that was dismissed on the premise that the
respondent was not a “consumer” within the ambit of Section 2(1)(d) of
the Act, 1986 by an order dated 1st April, 2004.
55. The respondent challenged the order of dismissal by an appeal
before the National Commission taking note of the nat ure of the
transaction and relying upon the order of the Commission in the case of
M/s Harsolia Motors dated 3rd December, 2004, the Commission held
that the transaction in reference to which the insurance claim has been
raised by the respondent has no direct nexus with the profit generating
activity and the insurance cover was obtained only to cover the loss, if
any, being suffered on account of theft or by natural calamit y and the
order passed by the National Commission dated 3 rdDecember, 2004 is
the subject matter of challenge in appeal before us.
56. In the light of the judgment passed by us today in Civil Appeal
Nos.5352-5353 of 2007 (National Insurance Co. Ltd. v. Harsolia Motors
and Others), the present appeal is without substance and is accordingly
dismissed. No costs.
57. The complaint is restored on the file of the State Commission
and the same be adjudicated on its own merits in accordance with la w
and may be decided as expeditiously as possible, but in no cas e later
than one year.
58. Pending application(s), if any, shall stand disposed of.
473
CIVIL APPEAL NO(S).2821 OF 2012 – National Insurance
Co. Ltd. v. M/s Ankur and Another.
59. The judgment under appeal is dated 15 th December, 2010
passed by the National Commission.
60. Brief facts of the case are that the respondent is e ngaged in
the business of garments in wholesale, who took a standard fire and
peril policy effective for the period from 6th January, 2006 to 5th January,
2007 for a total sum of Rs.60,00,000/-. There was a fire on 28thDecember,
2006 resulting in damage to the factory of the respondent. The appellant
appointed spot surveyor, M/s Apex Surveyors Pvt. Ltd. for final survey,
who submitted its report on 22 ndDecember, 2008 assessing the loss to
the tune of Rs.53,17,790/- after deducting salvage amount of Rs.1 lakh
and factoring sound stock being saved after the fire at Rs.51,969/-. The
appellant claimed that the respondent has failed to su bmit certain
documents to the assessor and, therefore, assessment on such basis
could be treated as void. In the meanwhile, SARFAESI procee dings
were initiated against the respondent by Canara Bank (secured creditor).
61. While the claim of the respondent was being processed, the
respondent filed a complaint before the State Commission cl aiming
Rs.60,00,000/- along with interest. At this stage, the appellant filed a
preliminary objection that the respondent is not a “consumer” within the
definition of Section 2(1)(d) of the Act, 1986. The State Commission at
one stage had held that the respondent is engaged in commercial activity
and, therefore, is not a consumer. The finding returned by the Sta te
Commission was reversed by the National Commission under its order
dated 15th December, 2012 holding that commercial entity availing its
services by the insurance company is a “consumer” in reference to the
transaction in terms of Section 2(1)(d) of the Act, 1986.
62. We have assigned detailed reasons in Civil Appeal Nos.(5352-
5353 of 2007 (National Insurance Co. Ltd. v. Harsolia Motors and
Others). In the light of the judgment passed by us today in t he said
appeal, the present appeal is without substance and is accordingly
dismissed. No costs.
63. The complaint is restored on the file of the State Commission
and the same be adjudicated on its own merits in accordance with la w
and may be decided as expeditiously as possible, but in no cas e later
than one year.
NATIONAL INSURANCE CO. LTD. v. HARSOLIA MOTORS
AND OTHERS [AJAY RASTOGI, J.]
64. It is brought to our notice that pursuant to order dated 11 th
May, 2011 of this Court, the appellant had deposited 50% of the claim
made by the respondent and the office report dated 15th February, 2023
indicates that an amount of Rs.59,74,814/- was invested in the fi xed
deposit with the maturity date of 16 th July, 2023. Let the amount be
transferred to the State Commission and the money invested in fixed
deposit shall continue and may be invested in an interest-bearing account
on automatic renewal basis and the parties shall abide by the orders of
the State Commission.
65. Pending application(s), if any, shall stand disposed of.
CIVIL APPEAL NO(S).3350 OF 2018 – The Bank of New
York Mellon (Formerly The Bank of New York) v. M/s METCO Export
International and Others.
66. The appellant has filed the present appeal by special l eave
against the judgment and order dated 6 th February, 2018 passed by the
National Commission.
67. Brief facts of the case are that respondent no.1 entered into a
transaction with a third party (an Italian buyer of respondent no.1) for
supply of five containers of sesame seeds and oil seeds for USD 141,375.
In relation to this transaction, the services of Fed eral Bank Ltd.
(respondent no.2) were availed to send the invoice, bills of lading,
surveyor’s certificate, bills of exchange, phytosanitary certificate and
other related documents (four documents) to the buyer’s banker in Italy.
Respondent no.2 engaged the services of the appellant to get expor t
documents delivered to the buyer’s banker in Italy which in turn engaged
services of a courier company (respondent no.3). The export documents
were lost in transit.
68. Respondent no.1 filed a consumer complaint before the State
Commission against the appellant, respondent no.2 and respondent no.3.
The complaint was dismissed on the premise that respondent no.1 is not
a consumer as defined under Section 2(1)(d) of the Act, 1986 b y an
order dated 10 th December, 2013, that became the subject matter of
challenge at the instance of respondent no.1 in appeal before the National
Commission relying on the judgment in Laxmi Engineering Works
(supra) and taking note of the judgment in the case of M/s Harsolia
Motors, the National Commission recorded a finding that the dispatch of
papers by the bank which were lost in transit and never received by the
475
Italian buyer per se is not related to generate any profit to the respondent
as the actual profit will come from the sale of the exported goods which
has no nexus to profit generating activity.
69. After we have heard counsel for the parties and considering
the view expressed by this Court in Civil Appeal Nos.5352-5353 of 2007
(National Insurance Co. Ltd. v. Harsolia Motors and Others), the present
appeal is without substance and is accordingly dismissed. No costs.
70. The complaint is restored on the file of the State Commission
and the same be adjudicated on its own merits in accordance with la w
and may be decided as expeditiously as possible, but in no cas e later
than one year.
71. Pending application(s), if any, shall stand disposed of.
CIVIL APPEAL NO(S). OF 2023
(@ SPECIAL LEAVE PETITION (CIVIL) NO(S).1039 OF
2020) – IFFCO Tokio General Insurance Company Limited v. M/s OPG
Energy (P) Ltd.
72. Leave granted.
73. The present appeal has been filed by special leave to appeal
against the judgment and order dated 27 th September, 2019 passed by
the National Commission.
74. We have heard counsel for the parties and taking note of the
fact initially an ex-parte order was passed by the Consumer Forum against
the appellant on 12th September, 2014, pursuant to which the appellant
was directed to pay Rs.9,57,903/- with interest @ 9% per annum from
the date of complaint i.e., 8th April, 2011and Rs.5,000/- towards litigation.
The appeal/revision filed at the instance of the appellant before the State
Commission and National Commission, both were dismissed by orders
dated 25th June, 2019 and 27th September, 2019 respectively.
75. After we have heard counsel for the parties, find no reason to
interfere with the impugned order and the same is accordingly dismissed.
No costs.
76. Pending application(s), if any, shall stand disposed of.
Ankit Gyan Appeals dismissed.
(Assisted by : Aarsh Choudhary, LCRA)
NATIONAL INSURANCE CO. LTD. v. HARSOLIA MOTORS
AND OTHERS [AJAY RASTOGI, J.]