AMICUS AI
Citation Codes
Neutral Citations
1999 INSC 473
Equivalent Citations
citation codes
Case Number
Disposition
Attorney(S)
Judges
Acts
  • Section 2(d) of the Consumer Protection Act, 50 of 1993 (replacing Ordinance 24 of 1993)
  • The Consumer Protection Act
  • Section [not specified] of the Consumer Protection Act, 1986
  • Section 21 of the Consumer Protection (Amendment) Act, 50 of 1993
  • Section 5, Subsection 2 of the Income Tax Act
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Cites
Cited by
Citation Codes
Neutral Citations
1999 INSC 473
Equivalent Citations
citation codes
Case Number
Disposition
Attorney(S)
Judges
Acts
  • Section 2(d) of the Consumer Protection Act, 50 of 1993 (replacing Ordinance 24 of 1993)
  • The Consumer Protection Act
  • Section [not specified] of the Consumer Protection Act, 1986
  • Section 21 of the Consumer Protection (Amendment) Act, 50 of 1993
  • Section 5, Subsection 2 of the Income Tax Act
Smart Summary

Case Summary

Factual and Procedural Background

The appeal had already been decided by the Supreme Court on 12 August 1999. Thereafter, the sole counsel for the appellant, Mr. R. N. Keswani, filed an application stating that he had been engaged in another court when the matter was taken up and that the advocate who made a mention of his absence was not authorised to argue the appeal. In response, the Court granted Mr. Keswani a further hearing—along with submissions from Mr. S. P. Mithal for the respondent—but ultimately reconsidered the very issues determined in the earlier judgment.

Legal Issues Presented

  1. Whether the appellant qualified as a “consumer” under Section 2(d) of the Consumer Protection Act, 1986, given that the machinery (CT scanner, etc.) was acquired and used in a diagnostic centre where most patients paid for the service.
  2. Consequently, whether the goods were obtained for “resale” or for a “commercial purpose” so as to exclude the appellant from the statutory definition of “consumer.”
  3. Whether the application based on counsel’s earlier absence justified reopening or altering the judgment dated 12 August 1999.

Arguments of the Parties

Appellant's Arguments

  • Relied heavily on Laxmi Engineering Works v. P.S.G. Industrial Institute (1995 3 SCC 583) to contend that “commercial purpose” under the Consumer Protection Act means “profit-making on a large scale,” which, according to the appellant, was not the case because only ten per cent of patients received free service.
  • Cited CIT v. Surat Art Silk Cloth Manufacturers’ Association (1980 2 SCC 31) to argue that an activity might still be regarded as charitable even if commercial in nature, implying that the diagnostic services should not be deemed purely commercial.
  • Invoked CIT v. Federation of Indian Chambers of Commerce & Industries (1981 3 SCC 156) for the proposition that if the dominant object is charitable, incidental profit does not change the character of the activity.

Respondent's Arguments

The opinion does not contain a detailed account of the respondent’s legal arguments.

Table of Precedents Cited

Precedent Rule or Principle Cited For Application by the Court
Laxmi Engineering Works v. P.S.G. Industrial Institute (1995 3 SCC 583) Clarified that whether a purchase is for “commercial purpose” is a question of fact; a buyer using goods for self-employment to earn a livelihood remains a “consumer.” The Court applied the tests set out in Laxmi Engineering and concluded that the appellant purchased the machinery for commercial use, not self-employment, and therefore was not a consumer.
CIT v. Surat Art Silk Cloth Manufacturers’ Assn. (1980 2 SCC 31; 121 ITR 1) Activities that are commercial in form can nonetheless be charitable for income-tax purposes. Distinguished: the decision arose under the Income-tax Act and the consumer definition question did not arise; it therefore did not aid the appellant.
CIT v. Federation of Indian Chambers of Commerce & Industries (1981 3 SCC 156) Dominant-object test for determining whether an institution’s activities are carried on for profit. Distinguished on the same basis as above; the Court held the case irrelevant to whether the appellant is a consumer under the Consumer Protection Act.

Court's Reasoning and Analysis

After granting a rehearing to accommodate Mr. Keswani, the Court engaged in a fresh examination of whether the appellant fit the statutory definition of “consumer.” The National Commission had earlier found, on the evidence, that the machinery was installed for a commercial purpose. The Supreme Court revisited the documents—including the “project document” submitted by the appellant to its bank—and confirmed that the equipment was intended to generate paid diagnostic services, with only a minority (ten per cent) of patients treated gratis. Applying paragraph 21 of Laxmi Engineering, the Court reasoned that:

  • The explanatory amendment to the Consumer Protection Act is clarificatory and applies to the case.
  • Determining “commercial purpose” is fact-specific; here, the facts showed a commercial venture.
  • The self-employment exception did not apply because the appellant operated a diagnostic centre for paying patients rather than earning livelihood solely through personal labour.

Having found no merit in the appellant’s legal submissions—drawn largely from income-tax jurisprudence and deemed irrelevant—the Court saw no basis to disturb its earlier judgment.

Holding and Implications

The Court reaffirmed its judgment of 12 August 1999 and disposed of the application without altering the substantive outcome.

Immediate effect: the appellant remains outside the definition of “consumer,” and any relief sought under the Consumer Protection Act is unavailable. The ruling does not create new precedent; it merely re-applies existing principles from Laxmi Engineering Works to the appellant’s fact situation.

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    Kalpavruksha Charitable Trust v. Toshniwal Brothers (Bombay) Pvt. Ltd. And Another

    S. Saghir Ahmad, J.— This appeal was disposed of by us by our judgment dated 12-8-1999.

    2. Mr R.N Keswani, appearing on behalf of the appellant has filed the instant application stating that he was the only counsel appearing on behalf of the appellant on 12-8-1999, but since he was busy in some other court when the matter was taken up by us, he could not come and argue the appeal. He also stated that the counsel who was deputed to make a mention that he (Mr R.N Keswani) was busy in some other court was not entitled to argue the appeal.

    3. The appeal was heard by us in detail and elaborate arguments were made on behalf of the appellant also, but having regard to the fact that Mr Keswani was the only counsel in the appeal and he has stated that the other counsel was not entitled to argue the appeal, we have heard Mr Keswani as also Mr S.P Mithal.

    4. The main reliance on behalf of the appellant has been placed on the decision of this Court in Laxmi Engg. Works v. P.S.G Industrial Institute (1995) 3 SCC 583 in support of the contention that the appellant was a “consumer” within the meaning of the definition set out in the Consumer Protection Act, 1986. The definition was considered by us and it was held that since the machinery in question was installed by the appellant for commercial purpose, it would not be a “consumer”.

    5. It is contended by the counsel for the appellant that the term “commercial purpose” has been considered by this Court in the case of Laxmi Engg. Works (1995) 3 SCC 583 and the observation of the National Commission that “commercial purpose” would mean “profit-making activity on a large scale” was approved and, therefore, the activity of the present appellant would not be a commercial activity as no “profit-making on a large scale” is involved. We do not agree. This Court in that decision had further held in para 21 as under:

    “21. We must, therefore, hold that:
    (i) The explanation added by the Consumer Protection (Amendment) Act, 50 of 1993 (replacing Ordinance 24 of 1993) with effect from 18-6-1993 is clarificatory in nature and applies to all pending proceedings.
    (ii) Whether the purpose for which a person has bought goods is a ‘commercial purpose’ within the meaning of the definition of expression ‘consumer’ in Section 2(d) of the Act is always a question of fact to be decided in the facts and circumstances of each case.
    (iii) A person who buys goods and uses them himself, exclusively for the purpose of earning his livelihood, by means of self-employment is within the definition of the expression ‘consumer’.”

    Applying those tests, the Court in the case of Laxmi Engg. Works (1995) 3 SCC 583 held that the appellant was not a “consumer” as the machinery in that case was not purchased for self-employment, but was purchased for “commercial purposes”.

    6. It is, therefore, clear that in spite of the commercial activity, whether a person would fall within the definition of “consumer” or not would be a question of fact in every case. The National Commission had already held on the basis of the evidence on record that the appellant was not a “consumer” as the machinery was installed for “commercial purpose”. We have been again referred to various documents, including the “project document”, submitted by the appellant itself to the bank for a loan to enable it to purchase the machinery in question, but we could not persuade ourselves to take a different view.

    7. Learned counsel for the appellant then referred to the case of CIT v. Surat Art Silk Cloth Manufacturers' Assn. (1980) 2 SCC 31, (1980) 121 ITR 1 wherein the activity of a charitable institution, though commercial in nature, was held to be a part of the charitable activity. This decision does not help the appellant as it was a decision rendered under the Income Tax Act and the question which we are considering here had not arisen in that case.

    8. Learned counsel for the appellant then referred to the decision of this Court in CIT v. Federation of Indian Chambers of Commerce & Industries (1981) 3 SCC 156, (1981) 3 SCR 489 and contended that if the dominant object of the trust or institution is charitable, the activity carried on by it would not be treated as an activity for profit. It is contended on the basis of the above decision that the activities carried on by the appellant were not profit-oriented nor was there any intention or object to carry on those activities to earn profit. This again was the decision rendered under the Income Tax Act and is not on the point involved in the present case whether the appellant was a “consumer” within the meaning of the Consumer Protection Act, 1986.

    9. In the instant case, what is to be considered is whether the appellant was a “consumer” within the meaning of the Consumer Protection Act, 1986, and whether the goods in question were obtained by him for “resale” or for any “commercial purpose”. It is the case of the appellant that every patient who is referred to the Diagnostic Centre of the appellant and who takes advantage of the CT scan etc. has to pay for it and the service rendered by the appellant is not free. It is also the case of the appellant that only ten per cent of the patients are provided free service. That being so, the “goods” (machinery) which were obtained by the appellant were being used for “commercial purpose”.

    10. No other point was pressed before us. We, therefore, maintain our judgment dated 12-8-1999 even after having heard Mr Keswani who insisted for a hearing through this application. The application shall be treated as disposed of.

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    Comments

    Kalpavruksha Charitable Trust v. Toshniwal Brothers (Bombay) Pvt. Ltd. And Another
    (Oct 12, 1999)