Laxmi Engineering Works v. P.S.G. Industrial Institute, II (1995) CPJ 1 (SC)

In This case after reviewing the provisions of the Act, the Supreme Court concluded that the District forums, State Commission and the National Commission are not considered “courts” even though they are vested with some authorities of the Civil Court they are precisely “quasi-judicial” bodies for rendering speedy and inexpensive redressal of disputes to the consumers. The idea of these bodies or agencies is to provide justice and fair treatment to consumers in the matters of goods and services. The scheme of “business-to-consumer” disputes helped the court in interpreting that words like “consumer” and “commercial purposes”
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Introduction

In this case the Court decided whether the appellant should be considered a consumer by interpreting the meaning of the word ‘consumer’, ‘commercial purpose’, ‘livelihood’ and ‘self-employed’. The case also discussed the authority and jurisdiction of the State Commissions and the National Commission. 

Facts

Laxmi Engineering Works, the appellant, is the holder of property established under the Employment Promotion Programme. It is a small-scale industry in Maharashtra and gains their financial assistance from the Maharashtra State Finance Corporation. The appellant placed an order with P.S.G industrial institute for the supply of Universal Turing Machine. According to the appellant, the supplier supplied the machine to them six months beyond the date which was decided and also delivered a defective piece. The machine was then installed for its operation and several defects were found which were brought to the notice of the respondent, PSG. PSG was made to pay 2.48 lakh as an award to the appellant holding that it was machinery bought by a consumer from P.S.G Industrial Institute. After analysis of judgements, it was held that a person who purchases goods for their own use is a consumer even if they earn a livelihood through it or by means of self-employment. Further, self-employed are entitled to damages from the sellers of faulty machinery that has been delivered or sold to them. 

Then PSG appeared before the National Commission and denied the appellant’s claim saying that the machine was for commercial purposes and Laxmi Engineering Works is not a consumer which is a requirement as stated under section 2(d) of the Act and so the appellant could not invoke the Consumer Protection ACT,1986  as their purpose was not that of a consumer but to earn profits.

Issues

  1. Whether the appellant will be considered a consumer to be eligible to file a complaint against P.S.G Industrial Institute and invoke the Consumer Protection Act?
  2. Whether the state and the National Commission are considered Courts?
  3. The meaning of the words “Consumer” and “Commercial Purpose”? 

Judgement

After the decision of the Maharashtra State Commission, (MCS) the respondent took the case before the National Commission and contended that the machine was for commercial purposes and Laxmi Engineering Works is not a consumer which is a requirement as stated under section 2(d) of the Act and so the appellant could not invoke the CPA as their purpose was not that of a consumer but to earn profits. Thereby, the complainant is not entitled to be considered as a consumer and the petition filed by him was not maintainable before the state commission. The order passed by MCS was set aside.

The case then went to the Supreme Court where the counsel stated that the appellant cannot certainly be considered to have purchased the machine for “commercial purpose”. The appellant is a small-scale industry, and the machine was purchased for earning a livelihood and the industry gets its backing from public financial institutions. Whereas the respondent stated that the appellant is an industry that runs for a commercial purpose and the National Commission, agreed.  

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After reviewing the provisions of the Act, the Supreme Court concluded that the District forums, State Commission and the National Commission are not considered “courts” even though they are vested with some authorities of the Civil Court they are precisely “quasi-judicial” bodies for rendering speedy and inexpensive redressal of disputes to the consumers. The idea of these bodies or agencies is to provide justice and fair treatment to consumers in the matters of goods and services. The scheme of “business-to-consumer” disputes helped the court in interpreting that words like “consumer” and “commercial purposes”.

A consumer according to Section 2 (d) means:

  1. A person who buys any goods for consideration
  2. Who uses the goods with the approval of the person who bought them for consideration?
  3. But it does not include a person who buys the good for resale or any commercial purpose. 

The word “commercial” means “about commerce” was interpreted by the National Commission. the commission considered that if a good has been purchased and it is being used for carrying on an activity on a large scale and for the purpose of attaining profits, the person cannot be considered a consumer. The court tried to make this explanation simpler by giving an example of a person who bought a car and used it for his/her personal use by driving it around as a cab. This explanation clarified, even if there has been a purchase of goods for “commercial purpose” this act would not remove the person from the definition of a “consumer”. When the use of the good is for oneself and one’s own livelihood by being self-employed, then the person will still be considered a consumer. Thus, it cannot be treated as a commercial purpose. Further, even if the purchaser takes the help of one or two people to assist or to help in operating the machine, the person will be treated as a consumer. A similar issue arose in the case of Secretary, Consumer Guidance and Research Society of India v. M/s. B.P.L. India Ltd

The court held that the Consumer Protection Act, 2019 gives clarification and shall apply to all the pending proceedings. Further, Section2(d) of the act is an essential question in a case that should be dealt with, as a basis of each case that the court comes across. 

Lastly, it was held about the present case that the appellant is a consumer and had purchased the machine for “Commercial Purposes”. 

Analysis

The court’s decision in the case is appropriate as it required a specific interpretation of issues raised and the court succeeded in the same and reached the conclusion providing a very fair and just judgement. 

The judgement has been arrived by way of correct reasoning that the purchase of a good does not amount to commercial purpose as held in the case Bhupendra Guna v Regional Managers.  Whereas in a case Suzuki Motorcycles India v Nagana Road lines where 26 crank shaft lines here destroyed in an accident and were deemed to be considered for “commercial purpose”.  This shows that their reasoning was correct and appropriate and in conformity with the existing law referred to in previously similar cases.

Also Read  Kapil N. Mehta, Surat Vs Shree Laxmi Motors Limited

The main dispute was that the appellant got a defected piece and so the court should have kept in mind that a party to the agreement was delivered with a defected piece. The view that the appellant cannot invoke the CPA in the case, but separate suggestions could be given to the appellant. The court granted the appellant the relief of no costs, but further suggestions could be granted as the court must, simply, help those in need of justice. The appellant had a genuine concern for filing the case, but the problem arose when they would not be considered as consumers in a particular case. Further, in the case Meera industries v Modern Constructions  the Court held that the party that faces defect, occurring in a product purchased for commercial purpose, could not be a consumer even if the defects were detected within the warranty period. . There is ambiguity and un-uniformity in the case, and this has been seen in many other cases decided previously. Though the reasoning, keeping in mind the consistency with previous similar cases, is correct but has led to ambiguity relating to the availability of resorts for the aggrieved party. 

Conclusion 

While the size of the business setup is a matter of concern it is also important to analyse the purpose of business; which maybe for ‘profit’ or ‘livelihood’. This is something which is still very ambiguous, despite being essential. There is no clarity on what the dividing line between what work will is done for livelihood or profit. This lack of clarity has led to many small-scale enterprises getting dismissed. Sellers and service providers have made it a habit of citing this amendment to try and wriggle out of complaints against them, which ultimately defeats the purpose of the statute.

The purpose of the act should not be to exclude any sort of corporate entity to stop them from benefiting from the act. Another suggestion which may be given is to amend the act to include the definition of ‘livelihood’, ‘self-employment’ and ‘commercial producer’. – Summarize in your own words and hyperlink.


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