Paramount Digital Color Lab v. Agfa India Pvt. Ltd.

By this order, we propose to dispose the above noted two appeals arising out of the judgment of the State Commission Uttar Pradesh dated 17.02.2011 in original complaint no. 7 of 2007.

2. Briefly put, the facts relevant for the disposal of the appeals are that M/s Paramount Digital Color Lal and its partners (complainant nos. 2 & 3 in FA No. 194 of 2011) filed consumer complaint alleging that complainant nos. 2 & 3 being unemployed graduates decided to start a business of Digital Color Lab in partnership with a view to earn livelihood for themselves and their family members. For that purpose, they purchased one developing-cum-printing machine from M/s Agfa India Private Limited ( respondent no.1) for Rs.62,78,500/- after obtaining finance from the bank. Respondent no.1 sent its engineers to install the machine. Even on the date of installment, performance of the machine was unsatisfactory and it suffered from number of defects. Respondent no.1 despite of several complaints neither rectified the defects nor replaced the machine. It was alleged that few months after the sale of the machine, respondent no.1 through its Managing Director informed the complainants about transfer of Consumer Imaging Division to a newly created group of companies under the name and style Agfa Photo India Pvt. Ltd.. It is contended that respondents after having realized full cost of the machine have failed to rectify the defects and also to give license key (password) to the complainants. Claiming this to be deficiency in service, consumer complaint was filed.

3. M/s Agfa India Private Limited as also M/s Agfa Photo India Private Limited resisted the complaints by filing separate written statements. In the written statements, the aforesaid respondents denied the allegations of the complainants on merits. A preliminary objection was also taken by the respondents that M/s Paramount Digital Color Lab and others are not the complainants as envisaged under section 2 (1 ) (d) of the Consumer Protection Act, 1986 ( in short, the Act) and as such complaint itself is not maintainable.

4. It may be noted that during the pendency of the complaint M/s Agfa Photo India Private Limited had filed an application seeking direction to the complainants for discovery / production of certain documents. The said application was filed in the year 2009 and it was not decided by the State Commission.

5. The State Commission, however, allowed the complaint vide the impugned order and directed thus: Complaint is allowed partially and following directions are given to the defendants no.2 & 4 that they will ensure the following payment to the complainant within two months of receipt of certified copy of this order:

1. Defendant Nos. 2 & 4 will repair the machine purchased by the complainant upto his entire satisfaction and make it completely functional within two months of the receipt of certified copy of this order and will also pay simple interest at the rate of 11 per cent on the total value of the machine from the date of purchase of machine and upto the date of repair of machine besides payment of Rs.5.00 lac to the complainant as compensation for financial losses, mental and physical harassment alongwith Rs.10,000/- as costs of the complaint

2. In case the machine in question is not repaired within the specified period and it is made functional, the total amount paid by the complainant against the value of machine alongwith above-mentioned interest, compensation and costs of complaint be paid to the complainant. Both the parties will bear costs of this complaint.

6. Being aggrieved of the order of the State Commission, the complainants preferred an appeal No. 194 of 2011 with a prayer to hold M/s Agfa India Pvt. Ltd. And its Managing Director responsible for payment of loss sustained by the complainants. M/s Agfa Photo India Pvt. Ltd. Filed cross appeal no. FA 222 of 2011seeking dismissal of complaint against them.

7. We have heard learned counsel for the parties and perused the record.

8. On perusal of the record of the State Commission, we find that State Commission despite of the fact that application of M/s Agfa Photo India Private India Limited seeking direction to the complainants for discovery of production of certain documents was pending, went on to decide the complaint without deciding the said application. On perusal of the application, we find that vide said application, following documents were required to be produced by the complainants:

I. Balance sheets along with Audit reports for the accounting years 2002-03; 2003-04; 2004-05;

II. Returns under the Sales Tax Act for the above said three years;

III. The declaration as to the number of employees by way of affidavit;

IV. The Registration Certificate under Uttar Pradesh DOOKAN OUR VANIJYA ADHISHTHAN ADHINIYAM, 1962 alongwith list of employees.

V. The code allotment document under The Employees Provident Fund and (Miscellaneous Provisions ) Act, 1952.

VI. The code allotment document under The Employees State Insurance Act, 1948.

VII. License under The Factories Act, 1948.

9. On reading of the above, it is clear that M/s Agfa Photo India Private Limited had sought the balance sheet with Audit reports for the accounting years 2002-03 onwards till 2004-05 and also Sales Tax return plus declaration as to number of employees by way of affidavit and few other documents. In our considered view, said documents are relevant for coming to the conclusion whether or not the complainants are covered within the definition of consumer? This lacunae itself is sufficient to set aside the order of the State Commission and remand the matter back for disposal of the complaint after deciding the application for production of documents. 10, Since this complaint is pending for the last more than seven years, we do not deem it appropriate to remand the matter because the complaint itself can be disposed of on the ground of maintainability. The issue pertaining to maintainability is whether or not the complainants are consumers as envisaged under section 2 (1 ) (d) of the Act. The relevant provision defines the consumer as under: (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 or avails of 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 or avails of 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 but does not include a person who avails of such services for any commercial purpose; Explanation------ For the purpose of this clause, commercial purpose does not include use by a person of goods bought and used by him and services availed by him exclusively for the purposes of earning his livelihood by means of self-employment.

11. Since this is a case of purchase of goods, section 2 (1) (d) is relevant. On reading of the above, it is clear that consumer is a person who buys any goods for consideration but does not include a person who buys goods for commercial purpose or resale. Explanation to this section provides that for the purpose of this clause, commercial purpose does not include use by a person of goods bought exclusively for the purpose of earning his livelihood by means of self employment.

12 Since the aforesaid explanation is in the nature of exception to the main provision, the. initial onus of proving that complainants are covered under the explanation is on the complainants. In order to succeed on this issue, the complainants are required to establish that they bought the subject machine for the purpose of earning their livelihood by means of self-employment.

13. In the matter of Cheema Engineering Services Vs. Rajan Singh 1997 (1) CCC 88 (NS) : , the Supreme Court while foisting initial burden of proving that the(1997) 1 SCC 131 complainant falls within the explanation has observed thus:

Self employment connotes altogether a different concept, namely, he alone uses the machinery purchased for the purpose of manufacture by employment 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 (Emphasisevidence. The burden is on the respondent to prove them supplied)

It is thus obvious that Parliament wanted to exclude from the scope of the definition not merely persons who obtain goods for re-sale but also those who purchase with a view to using such goods for carrying on any activity on a large scale for the purpose of earning profit. On this interpretation of the definition clause, persons buying goods either for resale or for use in large scale profit making activity will not be consumers entitled to protection under the Act. It seems to us clear that the intention of Parliament as can be gathered from the definition section is to deny the benefits of the Act to persons purchasing goods either for purpose of resale or for the purpose of being used in profit making activity engaged on a large scale. It would thus follow that cases of purchase of goods for consumption or use in the manufacture of goods or commodities on a large scale with a view to make profit will all fall outside the scope of the definition. It is obvious that Parliament intended to restrict the benefits of the Act to ordinary consumers purchasing goods either for their own consumption or even for use in some small venture which they may have embarked upon in order to make a living as distinct from large scale manufacturing or processing activity carried on for profit. In order that exclusion clause should apply, it is however necessary that there should be a close nexus between the transaction of purchase of goods and the large scale activity carried on for earning profit.

18. 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 applied 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

14. On reading of the above, it is clear that whether or not the complainant has purchased the goods exclusively for earning livelihood by means of self employment, is a question of fact and it would be determined on the basis of accompanying circumstances, such as whether complainant is using machine exclusively for himself and his family members or actually the machine was purchased for large scale manufacturing and processing activity to earn profits. In the light of the above noted settled position in law, when we look into the complaint , in para 3 the complainants have taken a plea that they are unemployed graduates and for earning livelihood they planned to start business of photography and purchased the subject machine in 2004. However, in para 14, there is totally contradictory averment. In para 14, it is categorically alleged that because of the acts of omission of the respondents, the complainants have suffered monetary loss on account of goodwill, capital investment, salary paid to operators and other workers, mental torture and agony etc. and for that they have prayed for Rs.20.00 lakh on account of loss of business. From the above averment, in para 14, it is clear that said machine was not purchased by the complainants for earning livelihood by means of self employment but it was a commercial venture for which they had recruited several operators and workers to work on that machine. The number of workers employed have been kept vague by the complainants. Looking into this aspect and quantum of business loss claimed, one cannot but conclude that the machine in question was purchased for commercial purpose. Thus, in our considered view complainants M/s Paramount Digital Color Lab and its partners are not the consumers and they could not have maintained the complaint. The State Commission instead of deciding this issue, has totally ignored the issue. Therefore, order of the State Commission cannot be sustained.

14. Learned counsel for the complainants has submitted that even if the said machine was purchased for commercial purpose, then also, the respondents cannot take advantage of the section 2 (1) (d) (i) for the reason that defect in the machine was since very inception and it was not rectified during the warranty period.

15. We do not agree with the above contention. Submission of learned counsel for the complainants in other words is that by not honouring the warranty, the respondents have committed deficiency in service. section 2 (1) (d) (ii) of the Act was amended w.e.f. 15.03 .2003 and as per the amendment, person availing or hiring the service for commercial purpose was excluded from the definition of consumer. In the instant case, complaint was filed in the year 2007. Therefore, the amendment in definition of consumer is squarely applicable. Since the warranty was in respect of the goods purchased for commercial purpose, as such, in view of section 2 (1) (d) (ii) of the Act, complainants are not covered within the definition of consumer as envisaged under the Act. Therefore, they could not have maintained the consumer complaint. In our aforesaid view, we are supported by the judgment of Honble Supreme Court in the matter of Birla Technologies Ltd. Vs. Neutral Glass and Allied Industries Ltd. (Civil Appeal No. decided on 15.12.2010.10650 of 2010)

15. In view of the discussion above, the appeal preferred by M/s Agfa Photo India Pvt. Ltd. & Anr. being appeal No. 222 of 2011 is allowed; order of the State Commission is set aside and complaint is dismissed. Since the complaint is dismissed, First Appeal No. 194 of 2011 preferred by M/s Paramount Digital Color Lab and others stand dismissed. ......................J AJIT BHARIHOKE PRESIDING MEMBER ...................... VINAY KUMAR MEMBER