Now, the National Consumer Disputes Redressal Commission has interpreted the meaning of commercial purpose in such a manner that business houses can also file complaints under the CP Act. This authoritative judgement was recently passed on December 3, 2004 by a bench of the National Commission comprising of Justice MB Shah and Rajyalakshmi Rao in a bunch of appeals requiring the interpretation of the term commercial purpose.
The issue before the National Commission was whether insurance policies taken by commercial units could be held to be hiring of services for commercial purpose and thereby excluded from the purview of the Consumer Protection Act, 1986 (as amended in 2003). The issue came up in a bunch of appeals against the orders passed by the Gujarat State Commission which had held that commercial units which had availed of insurance services were not maintainable as services for commercial purpose were excluded from the purview of the CP Act.
After considering the definitions of the words consumer, service, and commercial purpose, the National Commission observed that an insured who takes an insurance policy cannot trade or carry on any commercial activity with regard to the insurance policy taken by him.
Hence, hiring of services of insurance companies by taking insurance policies by persons / parties carrying on commercial activities cannot be held to be a commercial purpose. This is because the policy is taken for reimbursement or for indemnity for the loss which may be suffered due to various perils. There is no question of trading or carrying on commerce in insurance policies by the insured, even though the insurance coverage is taken for commercial activity carried out by the insured.
While arriving at this conclusion, the National Commission referred to Halsburys Laws of England, Volume 25, 4th Edition, and observed that insurance is a contract of indemnity and, therefore, the insured can recover the actual amount of loss and no more. Hence, an insurance policy is for protection of the interest of the insured in respect of articles or goods, and not for making any profit or trading for carrying on commercial purpose.
The National Commission also referred to various judgements of the Supreme Court and held that services in respect of any connected commercial activity would continue to remain within the purview of the Act. What is excluded would only be those goods purchases or services availed or hired where profit is the main aim.
Thus, the test to determine commercial purpose would determine whether the goods are purchased for resale or for any commercial purpose or the services are availed for any commercial purpose, ie, for generating profit.
The National Commission gave illustrations to explain how to interpret its judgement. For example, if a manufacturer cannot file a complaint under the CP Act in respect of any defect in raw material, as this would be for commercial purpose.
As against this, if the same manufacturer purchases a refrigerator, a television or an air-conditioner for his use at his residence or even in his office, it cannot be held to be for commercial purpose, and for this purpose he is entitled to approach the consumer forum under the Act. Similarly, when a hospital which hires the services of a medical practitioner, it would be a commercial purpose; but if a person avails of such services for his ailment it would be held to be not a commercial purpose.
In short, commercial purpose would mean goods purchased or services hired 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 in an activity which is not directly intended to generate profit, it would not be commercial purpose.
This landmark judgement will help business houses to avail of the benefits of a welfare legislation like the CP Act, but it might prove to be detrimental to the interest of the common man whose cases will get delayed because of the increase caused in the work load of the consumer fora which will once again have to entertain disputes filed by business houses and industries.
The author is an award-winning consumer activist and will answer readers queries in FE Investor. Send in your queries to [email protected]