Cheema Engineering Services v. Rajan Singh ., Supreme Court Of India, Judgment, Law, casemine.com

Factual and Procedural Background

The respondent purchased a machine known as “Brickman” from the appellant for the purpose of preparing, moulding, drying and burning bricks. He initiated proceedings under the Consumer Protection Act, 1986, asserting the status of a “consumer.” The District Forum and subsequent consumer tribunals accepted his claim, holding that the purchase was for self-employment and therefore outside the scope of “commercial purpose.” The appellant challenged those findings, leading to the present appeal before the Supreme Court of India.

Legal Issues Presented

Whether the respondent’s use of the “Brickman” machine falls within the Explanation to Section 2(1)(d) of the Consumer Protection Act, 1986—i.e., whether it was used exclusively to earn his livelihood by means of self-employment so as to qualify him as a “consumer” and exempt the purchase from the definition of “commercial purpose.”

Court's Reasoning and Analysis

The Supreme Court began by setting out Section 2(1)(d) of the Consumer Protection Act, emphasizing the proviso that excludes buyers who obtain goods “for resale or for any commercial purpose.” It then highlighted the 1993 Explanation, which narrows the term “commercial purpose” by excluding goods “bought and used … exclusively for the purpose of earning livelihood, by means of self-employment.”

The Court observed that the statute does not define “self-employment” and held that whether a purchase is for self-employment is an evidentiary question. Critical factors include:

Whether the buyer personally operates the machinery, possibly with assistance from family members.

Whether regular employees or workmen are engaged for a wider commercial enterprise.

The burden of proving exclusive self-employment, the Court ruled, rests on the respondent. Because the lower tribunals accepted the respondent’s status as a consumer without properly examining evidence on these points, their decisions were legally unsustainable. Consequently, all prior orders were set aside and the matter was remitted to the District Forum for fresh evidence and adjudication within six months.

Holding and Implications

Appeal Allowed; Prior Orders Set Aside; Matter Remitted to the District Forum.

The immediate effect is that the respondent must now produce evidence before the District Forum to prove that he uses the “Brickman” machine exclusively for self-employment. The decision underscores that the statutory carve-out for livelihood by self-employment is fact-specific, placing the evidentiary burden on the claimant. No broader precedent was articulated beyond this clarification.

Cheema Engineering Services v. Rajan Singh .

Order

1. Leave granted.

2. We have heard learned counsel on both sides.

3. The only question for consideration is whether the respondent has been using the machine ‘Brickman’ for clay preparation, brick-moulding, brick-drying and brick-burning, after purchasing the same from the appellant for earning his livelihood within the meaning of Explanation to Section 2(1)(d) of the Consumer Protection Act, 1986? Section 2(1)(d) reads as under:

“2. (1)(d) ‘consumer’ means any person who,—

(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any user of such goods other than the person who buys such goods for consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, but does not include a person who obtains such goods for resale or for any commercial purpose; or

(ii) hires any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person.”

4. If any goods are purchased for consideration, paid or promised or partly paid or under any system of deferred payment including any user of such goods other than the person who by such goods for the consideration paid or promised or partly paid or partly promised, or under any system of deferred payment when such use is made with the approval of such person, the purchaser is the ‘consumer’ within the meaning of the Act. But the Act provides for certain exceptions, namely, “does not include a person who obtains such goods for resale or for any commercial purpose; or ….”

5. The Explanation to the definition of ‘consumer’ has been added by way of an amendment in 1993 which reads as under:

“Explanation.—For the purposes of sub-clause (i), ‘commercial purpose’ does not include use by a consumer of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of self-employment.”

6. In other words, the Explanation excludes from the ambit of commercial purpose in sub-clause (i) of Section 2(1)(d), any goods purchased by a consumer and used by him exclusively for the purpose of earning his livelihood by means of self-employment. Such purchase of goods is not a commercial purpose. The question, therefore, is whether the respondent has been using the aforesaid machine for self-employment? The word “self-employment” is not defined. Therefore, it is a matter of evidence. Unless there is evidence and on consideration thereof it is concluded that the machine was used only for self-employment to earn his livelihood without a sense of commercial purpose by employing on regular basis the employee or workmen for trade in the manufacture and sale of bricks, it would be for self-employment. Manufacture and sale of bricks in a commercial way may also be to earn livelihood, but “merely earning livelihood in commercial business”, does not mean that it is not for commercial purpose. Self-employment connotes altogether a different concept, namely, he alone uses the machinery purchased for the purpose of manufacture by employing himself in working out or producing the goods for earning his livelihood. ‘He’ includes the members of his family. Whether the respondent is using the machine exclusively by himself and the members of his family for preparation, manufacture and sale of bricks or whether he employed any workmen and if so, how many, are matters of evidence. The burden is on the respondent to prove them. Therefore, the Tribunals were not right in concluding that the respondent is using the machine only for self-employment and that, therefore, it is not a commercial purpose. The orders of all the Tribunals stand set aside. The matter is remitted to the District Forum. The District Forum is directed to record the evidence of the parties and dispose of it in accordance with law within a period of six months from the date of the receipt of this order.

7. The appeal is accordingly allowed. No costs.

Civil Appeal No. 14787 of 1996, decided on November 1, 1996

Cheema Engineering Services v. Rajan Singh .

Factual and Procedural Background

Legal Issues Presented

Arguments of the Parties

Table of Precedents Cited

Court's Reasoning and Analysis

Holding and Implications

Cheema Engineering Services v. Rajan Singh .

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