Nature of service determines its purpose

The Consumer Protection Act excludes from its purview disputes which relate to a commercial purpose. The only exception is commercial transactions which help buyers earn their livelihood. So, traders and business houses often try to camouflage a dispute and file a consumer complaint. This is done to save on court fees and get faster justice. But, this is not permissible.

What exactly is meant by the term "commercial purpose" and "livelihood"? These terms are neither defined under the Consumer Protection Act or under the Rules. Consequently, there are times when a thin line of distinction is drawn between commercial purpose and commercial activity.

Commercial purpose is considered to be one where the goods or services are directly involved in generating profit. In contrast, commercial activity is considered to be any other business activity which does not directly result in profit-making. When this distinction is drawn, complaints regarding “commercial purpose” are excluded but complaints regarding “commercial activities” are considered maintainable under the Consumer Protection Act. Since the distinction is very fine, it results in a lot of confusion, and there are conflicting views and judgements.

Puran Murti Education Society in Kami Village at Sonepat in Haryana had a dispute regarding electricity supply. It filed a consumer complaint before the Sonepat District Forum against the electricity supply board. The District Forum allowed the complaint and granted relief to the Society.

The electricity board appealed against this order to the Haryana State Commission, which set aside the order on the sole ground that the education society could not be termed a consumer under the Consumer Protection Act. The State Commission arrived at this conclusion because the connection provided was a non-domestic one, installed at the college run by the Society.

The Society approached the National Commission. The Society argued the State Commission's order was incorrect because it was an educational institution imparting knowledge to students. Electricity was not being consumed for the manufacture of any product meant for sale in the market but for providing facilities/benefits to students. The Society claimed the electricity consumption was thus, for a social and benevolent objective, not for commercial purpose. The Society also claimed the electrical connection was not a commercial connection, but a non-domestic one. It argued the term ‘non domestic’ is not the same as ‘commercial’ and hence, the State Commission had erred in rejecting the complaint.

Rejecting these arguments, the National Commission observed the education society was running an engineering college. The non-domestic connection was for supply of electricity to this college. There was no evidence to show the college was being run for a purely philanthropic or charitable purpose. When questioned, the Society admitted it was not providing free education but charging its students. In view of this, the bench of Justice JM Malik and Vinay Kumar held the connection was for a commercial purpose, though it was termed a non-domestic connection. Accordingly, it upheld the order of the State Commission holding that it was not a consumer dispute and the complaint was not maintainable under the Consumer Protection Act.

The law on the subject is not clear and is based on judicial interpretations which differ from time to time. In the present interpretation, disputes regarding insurance claims filed by business establishments are maintainable, as insurance is not for profit but for indemnification of loss. Likewise, livelihood has been interpreted as a person applying goods or services for his own use to generate income for his sustenance. Thus, generally, when there is large scale activity, or when there are persons employed in business, it would not be treated as a consumer dispute.

The author is a consumer activist