REPORTABLE IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO(S).5352-5353 OF 2007 NATIONAL INSURANCE CO.
Respondent no.1 took out a fire insurance policy with the appellant for a cover of Rs.75,38,000/- and respondent no.2 for a cover of Rs.90 lakhs. A complaint was instituted by the respondent, M/s Harsolia Motors, a partnership firm, before the State Commission, for compensation of damage caused on the ground that post-Godhra incident, which took place on 27 February, 2002, riots broke out resulting into complainant’s goods being destroyed by fire set up by rioters on 28 February, 2002 and the respondent/complainant was entitled to be indemnified the insured sum under the policy of insurance.
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Harliaso Motors and Others) arising from the judgment of the National Commission, placing reliance on the impugned judgment dated 3 December, 2004, applying the self-same principles are also challenged at the instance of the appellant insurer before us. Learned counsel for the appellant submits that there cannot be a blanket inclusion of all insurance matters within the purview of Act, 1986 and if that is being taken at the face value, it would render the provisions of the Commercial Courts Act, 2015 (hereinafter “Act, 2015”) nugatory and submits that Section 2(1)(XX) of the Act,2015 includes insurance and re-insurance within the ambit of commercial disputes.
Learned counsel further submits that dominant purpose of obtaining insurance contracts by the business entities is to earn profits and thus has a close and direct nexus with it and accordingly these entities are not entitled to file the claim before the Consumer Court seeking summary proceedings and the present disputes are not of a small disgruntled consumer who is seeking claim of an insurance for loss of mobile for personal use, or of autorickshaw driver seeking claim for expenses incurred for fixing a defective engine as that is covered for his livelihood.
Learned counsel submits that if contention to the contrary of insurance for commercial activities falling within the ambit of the Act, 1986 is to be accepted, then obtaining any service for any commercial activity even for facilitating profit generation for commercial enterprise would fall within the expression “consumer” as defined under Section 2(1)(d) of the Act, 1986 and it would lead to improbability as it would go against the basic tenets of service being used for commercial ends whose violation give rise to civil action and not consumer redressal. Learned counsel submits that if the respondent’s submission of insurance as a service availed by any person within the meaning of the Act is accepted, this would entail an exponential growth of consumer disputes across the country, not only would that lead to frustration of literal spirit and intent of the socially and economically beneficial legislation, rather it would inadvertently give rise to the premiums charged by the insurance company which would again subserve the overall intent of the Act, as actual consumers who regularly avail the services will have to pay more for the same coverage and this can be taken note from the Statement of Objects and Reasons which was kept in mind for the purpose of making the amendment in the year 2002. Per contra, learned counsel for the respondent, submits that the purchase of insurance policy cover is a contract of indemnification of particular risk and not a contract of doing or not doing something to earn profit/loss out of such act. Learned further submits that any transaction by commercial enterprises even without immediate intention to make profit cannot be regarded for “commercial purpose”, otherwise all transactions by commercial enterprises may or may not have even remote co-relation of generating profit will be treated for commercial purposes. Thus, buying a water plant cannot be treated for commercial purpose, otherwise virtually all transactions by commercial enterprise will get colour of commercial purpose and had it been such an intention of the legislature, then it would have worded the definition of term “consumer” differently – instead of “any person” would have used “any person other than commercial enterprises”, but the statute in its wisdom has allowed to cover commercial transaction with commercial purpose. Various definitions and provisions which elaborately attempt to achieve this objective have to be construed in this light without departing from the settled law that a Preamble cannot control otherwise plain meaning of a provision. A scrutiny of various definitions such as “consumer”, “service”, “trader”, “unfair trade practice” indicates that legislature has attempted to widen the ambit and reach of the Act.
Section 2(1)(d) defines “consumer”, Section 2(1)(m) defines “a person” and Section 2(1)(o) defines “service”, which are relevant to examine the moot question raised for our consideration are reproduced hereunder: “2. (o) “service” means service of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both, [housing construction], entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service.” The word “consumer” is the fulcrum of the Act. However, the word “consumer” so defined does not include a person, who, in case of goods obtains such goods for resale or for any commercial purpose, or who, in case of service, avails of such services, for any commercial purpose. So, as “services” defined under Section 2(1)(o) includes banking, insurance and if there is deficiency in service in the matter of banking/insurance, etc., subject to the fact that he is a consumer under Section 2(1)(d), remedy is always available to such a consumer to invoke the jurisdiction of the Act, 1986. But the defect in one and deficiency in other may have to be removed and compensated differently. No coming back to the definition of the expression ‘consumer’ in Section 2( d ), a consumer means insofar as is relevant for the purpose of this appeal, ( i ) a person who buys any goods for consideration; it is immaterial whether the consideration is paid or promised, or partly paid and partly promised, or whether the payment of consideration is deferred; ( ii ) a person who uses such goods with the approval of the person who buys such goods for consideration; ( iii ) but does not include a person who buys such goods for resale or for any commercial purpose.
The National Commission appears to have been taking a consistent view that where a person purchases goods “with a view to using such goods for carrying on any activity on a large scale for the purpose of earning profit” he will not be a ‘consumer’ within the meaning of Section 2( d )( i ) of the Act. The explanation however clarifies that in certain situations, purchase of goods for “commercial purpose” would not yet take the purchaser out of the definition of expression ‘consumer’. The several words employed in the explanation, viz., “uses them by himself”, “exclusively for the purpose of earning his livelihood” and “by means of self- employment” make the intention of Parliament abundantly clear, that the goods bought must be used by the buyer himself, by employing himself for earning his livelihood.
(In the above illustrations, if such buyer takes the assistance of one or two persons to assist/help him in operating the vehicle or machinery, he does not cease to be a consumer.) As against this a person who purchases an auto-rickshaw, a car or a lathe machine or other machine to be plied or operated exclusively by another person would not be a consumer. Unique Shanti Developers and Others in which one of us (Rastogi, J.) was a member and the question arose for consideration was whether the purchase of flats for the purpose of providing accommodation to nurses employed by the Lilavati Kirtilal Mehta Medical Trust hospital qualifies a purchase of services for commercial purpose and whether the Hospital Trust was excluded from the definition of “consumer” under Section 2(1)(d) of the Act, 1986, this Court after revisiting the scheme of the Act, 1986 and taking note of the law of precedence in Laxmi Engineering Works (supra) of which a reference has been made and placing reliance on the judgment of this Court in Paramount Digital Colour Lab and Others v. To summarise from the above discussion, though a strait jacket formula cannot be adopted in every case, the following broad principles can be culled out for determining whether an activity or transaction is “for a commercial purpose”: 19.1.
If it is found that the dominant purpose behind purchasing the good or service was for the personal use and consumption of the purchaser and/or their beneficiary, or is otherwise not linked to any commercial activity, the question of whether such a purchase was for the purpose of “generating livelihood by means of self-employment” need not be looked into.” This Court noticed that the hostel facilities were provided to the nurses employed by Lilavati hospital but after some time of completion of the project because of alleged poor building quality, the structure became dilapidated and the nursing staff had to vacate the flats being used by them and a consumer complaint filed by the Lilavati hospital for compensation on account of annual loss of rent was maintainable and whether the Trust was a consumer under Section 2(1)(d) of the Act. Thus, what is important is the transaction in reference to which the claim has been filed under the Act, 1986 by a person who claims himself to be a “consumer” covered under Section 2(1)(d) of the Act, 1986, such exposition of law on the subject has been further reiterated by this Court recently in Shrikant G.
The fact that the insured is a commercial enterprise is unrelated to the determination of whether the insurance policy shall be counted as a commercial purpose within the purview of Section 2(1)(d) of the Act. Sometimes, however, the context may suggest that word “includes” may have been designed to mean “means”. Section 3 of the 1986 Act upon which reliance is placed by learned counsel for KPTC provides that the provisions of the Act are in addition to and not in derogation of any other law for the time being in force. It does not appear to us to admit of any doubt that company is a person within the meaning of Section 2(1)( d ) read with Section 2(1)( m ) and we hold accordingly.” Applying the aforesaid test, two things are culled out; (i) whether the goods are purchased for resale or for commercial purpose; or (ii) whether the services are availed for any commercial purpose. Similarly, a hospital which hires services of a medical practitioner, it would be a commercial purpose, but if a person avails such services for his ailment, it would be held to be a non- commercial purpose. and Another held that the machine was purchased by the Charitable Trust for commercial purpose as every person who takes a CT scan has to pay for it and the services rendered are not free and thus the Trust was not a consumer.
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This Court held that the purchase was for a commercial purpose and the manufacturer was not a “consumer” for the purpose of the Act, 1986.
If an objection is raised that as machine was purchased for commercial purpose and the complainant cannot be said to be a consumer as defined under the Act, 1986 as he has been employed for commercial purpose and has been carrying out business for profit indeed the complainant is not a consumer under the Act, 1986. Insurance contracts are contracts of indemnity whereby one undertakes to indemnify another against loss/damage or liability arising from an unknown or contingent event and is applicable only to some contingency or act likely to come in future. Levis Strauss (India) Private Limited has held as under: “ 53.A contract of insurance is and always continues to be one for indemnity of the defined loss, no more no less. The present appeal is directed against the order passed by the National Commission dated 3 December, 2004 holding that the insurance policy taken by the respondent (commercial unit) in the facts of the case was only to indemnity the loss which the respondent/complainant has suffered and the transaction in reference to which the insurance claim has been repudiated by the appellant, had no direct nexus with the profit generating activity and was a “consumer” as defined under Section 2(1)(d) of the Act, 1986. The respondent/complainant (insured) is doing the business of sale and purchase of jewellery in the name and style of “Khazana Jewellers” who obtained a policy of insurance from the appellant for the period 21 October, 1999 to 20 October, 2000 to cover the risk of ornaments in business.
In the light of the judgment passed by us today in Civil Appeal Nos.5352-5353 of 2007 (National Insurance Co. Harsolia Motors and Others), the present appeal is without substance and is accordingly dismissed. There was a fire on 28 December, 2006 resulting in damage to the factory of the respondent. The finding returned by the State Commission was reversed by the National Commission under its order dated 15 December, 2012 holding that commercial entity availing its services by the insurance company is a “consumer” in reference to the transaction in terms of Section 2(1)(d) of the Act, 1986. Let the amount be transferred to the State Commission and the money invested in fixed deposit shall continue and may be invested in an interest-bearing account on automatic renewal basis and the parties shall abide by the orders of the State Commission. Respondent no.2 engaged the services of the appellant to get export documents delivered to the buyer’s banker in Italy which in turn engaged services of a courier company (respondent no.3). The complaint was dismissed on the premise that respondent no.1 is not a consumer as defined under Section 2(1)(d) of the Act, 1986 by an order dated 10 December, 2013, that became the subject matter of challenge at the instance of respondent no.1 in appeal before the National Commission relying on the judgment in Laxmi Engineering Works (supra) and taking note of the judgment in the case of M/s Harsolia Motors, the National Commission recorded a finding that the dispatch of papers by the bank which were lost in transit and never received by the Italian buyer per se is not related to generate any profit to the respondent as the actual profit will come from the sale of the exported goods which has no nexus to profit generating activity.
Case Title: NATIONAL INSURANCE CO. LTD. Vs. HARSOLIA MOTORS (2023 INSC 367)
Case Number: C.A. No.-005352-005353 / 2007
