Rajeev Metal Works and Ors. v. the Mineral Metal Trading Corpn. of India Ltd.
The appellant set up an industry at U nnao in U ttar Pradesh. He put
up an application to the District Industry Centre, Unnao on 13.6.1986 for
the supply of about 300 M.T. of G.P. Steel Sheets. The Government of
India had constituted .the respondent as statutory authority to canalise the
procurement of the canalised items for imports and for onward delivery to C
the consumer industries. The General Manager of the District Industry
Centre recommended to the respondent of the appellants' requirement of
300 M.T. In furtherance thereof, on 24.8.1987, the respondent had written
a letter to the appellants that they could arrange supply of 50 M.T. and
directed the appellants to open letters of credit with them and to comply
with the requirements mentioned in the letter referred to therein. Relevant D
terms are as under :
"3. Please note that Margine Insurance is to be arranged by us.
For this purpose suppliers will send a cable advice to us immedi
ately after the shipment. Suitable provision in this regard has been E
made in our Purchaser Order.
4. On receipt of documents from the suppliers, our port offices
will get in touch with your banker. Please note that the consignment
(s) is/are to be cleared by you through customs on receipt of
documents from our port office/your bankers to whom documents F
will be presented against Letter of Credit opened on us. In respect
of LC established by you against our authority directly in favour
of foreign supplier, you are advised to contract our.Regional Office
immediately upon receipt of documents by your banker for arrang-
ing payment of our service charges and insurance etc. and also for G
getting the documents endorsed in your favour.
5. Please note that in ihe event of any complaint in regard to
shortage damage and quality, you should report the matter to us
immediately with all supporting documents to enable us to take up
the matter with the foreign suppliers. Your claim will be settled H
on us by foreign suppliers and to the extent settlements are
received by us. In case of complaints or short receipts and damage,
necessary claim should be lodged by you with the insurance com
pany/steamer company while taking delivery of goods at the port.
Any visual defect noticed on materials other than damage in
handling should be reported immediately upon receipt. All other
complaints should he reported within 30 days from the date of
receipt of goods.
In the meanwhile, we request you to kindly go through the Pur
chase Order and confirm per return that the same is in order."
After pooling the requirements of various industries, the respondent
had placed a consolidated indent with a foreign seller for the supply of the
total required quantity of the canalised items, in this case G.P. Sheets. The
foreign seller appears to have expres;ed difficulty in supplying the entire
D quantity due to exigencies mentio_ned in their .reply. In the meanwhile, the
appellants admittedly had opened letters of credit with the respondent for
50 M.T. of G.P. Sheets. The respondent in turn had opened letters of credit
with the foreign suppliers for bulk supply and the foreign suppliers were
unable to supply required quantity. Consequently, the respondent had
written a letter to the appellants to receive 20% of the indented require-
E men! but the appellants seem to have not complied with it. The respondent
in the counter-affidavit filed in the Tribunal stated thus :
"The supplier i.e. M/s. YOEST ALPINE were not in a position to
organise shipment against the subsequent LOI as there was delay
in setting up of the galvanishing line. Due to these circumstances,
the supplier wanted to invoke the FORCE MAJEURE clause on
the plea that conditions prevailing at their end warranted invoca
tion of FOR CE MAJEURE and hence inability to fulfill contrac
tual obligations qua the respondent.
The respondent keeping in mind the interest of complainant
and other end users in the country persisted in their efforts to
secure shipment and after great efforts succeeded in obtaining
supply from M/s. MONTON METALS on behalf of M/s. YOEST
ALPINE. M/s. Monton Metals agreed tc .hip 20% of the quantity
at the same price.
RAJEEV METAL WORKS v. M.M.T.C.I. Lill. 123
The Complainants and other end users in the country were A
informed by the respondent that in view of the FORCE
MAJEURE Conditions operating in the producing countries/the
respondent at best could have recovered 2% guarantee money
from the supplier towards non-performance of contractual obliga
tions by the supplier. It was in these circumstances that the respon- B
dent advised all end users to make necessary financial
arrangements and take delivery of 20% of the order placed on
their respective behalfs. They were further advised to confirm their
acceptances ( s).
The complainants did not reply to the correspondences of the C
respondent. The goods earmarked for them were allowed to be
unloaded at the port as the respondent's Bombay Office advised
that their L/C was operative. However, the document pertaining
to their consignment were returned by the banker who stated that\
the L/C in respect of the complainants was not valid.
The complainant vide their telegram dated 5.12.1988 agreed to
accept the goods in question without prejudice to their right to
seek legal remedy by going to Court. The respondent informed
them to take delivery of the goods in question by 26.12.88. The
complainants failed ·to respond and did not take delivery. The E
goods in question became liable for demurrage charges, it was in
these circumstances an alternative buyer was asked to take delivery
of the goods in question after paying demurrage and other charges.
It was only in these circumstances that the goods in question were
delivered to another end user. Annexed herewith and marks as
Annexure is copy of the Telegram dated 5.12.1988." F
Since the respondent had not supplied the required quantity
demanded by the appellants, the appellants laid the complaints before the
National Consumer Disputes Redressal Commission (for short, "the Com
mission") under Section 21 of the Consumer Protection Act, 1986, (for G
short, "the Act"). The Commission in the impugned order dated November
12, 1992 dismissed the complaint in the following words :
" ...... we are clearly of the opinion that the transaction involved in
this case is only one of Sale of Goods for commercial purpose and
not an agreement for rendering any service for consideration. In H
124
SUPREME COURT REPORTS (1995) SUPP. 6 S.C.R.
these circumstances, the controversy raised in the this case cannot
be regarded as a Consumer Dispute which are appropriately be
brought before this Form. The Original Petition is dismissed on
this limited ground. No costs."
Calling it in question this appeal under s.23 of the Act has been filed.
Shri G.L. Sanghi, learned senior counsel for the appellants has
contended that the respondent had undertaken to render service to the
appellants for procuring the required quantity of the G.P. Sheets. The
appellants had paid what was demanded from them and had also complied
C with all the conditions mentioned in the letter. Having had the goods
supplied by the foreign sellers, instead of delivering the goods to the
appellants diverted them for extraneous consideration to others. Thereby,
the appellants had suffered damages quantified to the tune of Rs. 17, 71,038
and sought recovery thereof from the respondent for its failure to render
D services undertaken under the contract. Various letters exchanged between
the appellants and the respondent would clearly show that the transaction
is one of service contract to be rendered by the respondent to the appel
lants and due to deficiency in the service, the appellants suffered the above
damages. Consequentially, the appellants as consumer under Section
. 2(1)( d)(ii) of the Act are entitled to redressal from the Commission. The
Commission was not right in rejecting the claim of the appellants on the
ground that it is a commercial transaction. Shri M.L. Verma, learned senior
counsel for the respondent on the other hand, contended that there is no
direct relationship of buyer and seller between the appellants and the
foreign suppliers. The appellants had opened letters of credit with the
respondent and had agreed to take delivery of the goods to be supplied by
the respondent after getting them from the foreign suppliers, subject to the
terms and conditions mentioned therein. In furtherance thereof, the
respondent had opened letters of credit directly with the foreign suppliers
within the exclusionary clause of Section 2(1)(d)(i) of the Act which defines
'consumer'. Thereby, the definition excludes such transaction from the
G purview of the Act. The learned counsel for the appellants elaborated the
contention that the word 'commercial' used in the definition requires
broader construction in a normal trading sense since it being in the nature
of the exception. When it is used in the context of resale, the words
transaction of commercial nature must be construed to mean direct sale
H between the buyer and the seller as consumer goods b1?! not when the
RAJEEV METAL WORKS v. M.M.T.C.J. LTD. 125
goods are intended to be consumed for manufacturing purpose to produce A
a distinctly identifiable different commercial commodity. Therefore,
s.2(1)(d)(i) is not attracted to the facts in this case.
Hav.ing given our anxious and very careful consideration to the
respective contentions, the question emerges whether the appellant-firm is
a consumer. The word 'consumer' has been defined under s.2(1)( d)(i) and
(ii) thus :
"(d) 'Consumer' means any person who,-
(i) buy 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 D
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 promised, or under
any system of deferred payment and includes any beneficiary of E
such services other than the person who hires or avails of the
services for consideration paid or promised, or partly paid or partly
promised, or under any system of deferred payment when such
services are availed of with the approval of the first mentioned
person."
Clause (i) provides that one who 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 G
defeired 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, is a consumer. The admitted case is that this does not
apply. The question, therefore, is whether the service of the respondent
availed of by the appellants is covered under Section 2{1)(d)(ii). Whether
the transaction is in the nature of buying the goods for a consideration H
126 SUPREME COURT REPORTS (1995] SUPP. 6 S.C.R.
which has been paid or promised? whether the transaction in question
excludes the person who obtains such goods for resale or for any commer
cial purpose from the purview of the Act? It is true as contended for the
appellants that the definition requires to be interpreted broadly so as to
give effect to the legislative intention envisaged under the Act. But when
the legislature having defined the term 'consumer' in broader terms, sought
to exclude certain transactions from the purview of the Act what could be
'the meaning that would be assigned to the exclusionary clause, viz., "but
does not include a person who obtains such goods for resale or for any
commercial purpose". The intention appears to be that when the goods are
exchanged between a buyer and the seller for commercial purpose or for
resale, the object of the Act appears to be to exclude such commercial
transactions from the purview of the Act. Instead, legislature intended to
confine the redressal to the services contracted or undertaken between the
seller and the 'consumer' defined under the Act. It is seen that the
appellants admittedly entered their letters of credit with the respondent.
The respondent is a statutory authority to act as canalised agency on behalf
of the industries to procure required goods on their behalf from the foreign
seller and acts in that behalf ju terms of the letter of credit and conditions
enumerated thereunder. It is seen that the respondent did not undertake
any direct responsibility for supply or liability for non-supply of the goods.
On the other hand, the appellants had solicited to have the goods supplied
to it through the respondent and opened letter of credit in favour of the
respondent. After collecting requirements from various industries in the
country admittedly a consolidated demand for supply of the required
quantity of the G.P. Sheets was indented with foreign sellers so as to
procure the required goods for onward supply to the appellant and others.
The goods supplied were required for commercial purpose, i.e., for
manufacture and resale as finished goods during the course of their
commercial business. Under the circumstances, the appellants intended to
purchase these goods for commercial purpose, namely, to manufacture the
tin sheets for resale. It is true that the word 'resale' used in the exclusionary
G clause of Section 2(1)(d)(i) was used in connection with the purchase of
goods defined in the Sale of Goods Act for commercial purpose. The
ultimate object of the supply of the goods, namely, G.P. Sheets to the
appeilants was manufacture of finished goods for resale. The goods were
intended to be used for commercial purpose. Thus considered, we are of
the opinion that the appellants are not consumers by virtue of the ex
clusionary clause under Section 2(1)(d)(ii). Therefore, they would not
RAJEEV METAL WORKS v. M.M.T.C.!. LTD. 127
come under Section 2(1)(d)(ii) of the Act. Since the object of the supply A
and purchase of the goods was commercial purpose, it would certainly
come within the exclusionary clause of Section 2(1)(d)(ii). Otherwise, if the
construction sought to be put up by Mr. Sanghi is given effect to, while
foreign sellers are not liable under the Act within the definition of
s.2(1)(d)(i) as they get excluded from the purview of the Act, the canalising B
agency would be fastened with the liability. Thereby, the definition of the
word 'consumer' under Section 2(1)(d)(ii) is not attracted.
Consequentially, clause (ii) of Section 2(1)( d) does not apply. Con
sidered from this perspective, we are of the opinion that the appellants are
not consumer under Section 2(1)(d)(ii) of the Act. Thereby the complaint C
would be not lie under Section 21 of the Act.
The appeal is accordingly dismissed but, in the circumstances, with
costs.
R.A. Appeal dismissed. D