The Supreme Court on Tuesday held that if business-to-business disputes were construed as consumer disputes, it would defeat the very purpose of providing speedy and simple redressal as envisaged under the Consumer Protection Act [Shrikant G Mantri v Punjab National Bank].
A Bench of Justices L Nageswara Rao and BR Gavai found that a person availing services for commercial purposes, to come within the definition of a consumer under the Act, would have to establish that the services were availed only for the purpose of earning a livelihood by means of self-employment.
“There cannot be any straitjacket formula and such a question will have to be decided in the facts of each case, depending upon the evidence placed on record,” the Bench noted.
In a nutshell
– The appellant, a stockbroker, availed an overdraft facility from the respondent bank with shares as security. The appellant also worked at the bank;
– On repayment of overdraft, the shares were not returned and thus, the NCDRC was moved;
– The Commission held that he was not a ‘consumer’ under the Consumer Protection Act;
– The Supreme Court held that if purchase of goods was for commercial purpose, the purchaser would not be a consumer;
– Only transactions for earning of livelihood by means of self-employment would be included;
– The relationship in this case was held to be purely “business to business”, and the appeal was dismissed.
The top court was hearing an appeal against an order of the National Consumer Disputes Redressal Commission (NCDRC) which held that the appellant was not a consumer under the Act.
The appellant was a stockbroker who had availed an overdraft facility from the respondent-bank and pledged certain shares as security. The appellant was also a working as a stockbroker of the bank.
On reaching a settlement, and a ‘no-dues’ certificate having been issued, the appellant sought the release of the shares pledged as security. When this request was not honoured, the appellant filed a complaint before the Commission, alleging deficiency in services.
The Commission held that the appellant availed the services of the bank for a ‘commercial purpose’ and thus, was not a consumer under the Act. Challenging this order, the apex court was moved.
It was argued that the appellant had a dual relationship with the bank, in one capacity as a consumer and the other as a worker. It was stated that there was no reason for the shares to be withheld once the dues had been cleared.
He submitted that the Act includes anyone who could show that the services availed by them were exclusively for the purposes of earning livelihood by means of self-employment.
Contrarily, the bank insisted that the Act was a special statute enacted with the purpose of providing speedy and simple redressal in consumer disputes, and if the definition of ‘consumer’ was expanded to someone who availed services for commercial purposes, the intent of the Act would be defeated.
On hearing both parties, the Court elaborately discussed the legislative history as to how the Act came to exist in its present form. Taking note of Parliament’s intent behind the Act, the Bench said,
“It has been held that the entire Act revolves around the consumer and is designed to protect his interest. It provides for business-to-consumer disputes and not for business-to-business disputes.”
The Bench, on discussing various precedents, concluded that a consistent view was taken that when goods are purchased “with a view to using such goods for carrying on any activity on a large scale for the purpose of earning profit,” one would not be a ‘consumer’ under the Act.
“It has been held that it is not the value of the goods that matters but the purpose to which the goods so bought, are put to,” the Court explained.
However, it was stressed that whether a transaction was for a commercial purpose would depend on the facts of the case.
In furtherance of this, when the Court examined the relationship between the appellant and respondent, it was concluded that the same was “purely a business to business relationship.”
“It cannot be said that the services were availed exclusively for the purposes of earning his livelihood by means of self-employment.”
With this, the appeal was dismissed.
Senior Advocate Shyam Divan appeared for the appellant and Senior Advocate Dushyant Dave represented the bank.
Read Judgment here:
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