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Union Bank Of India v. Learning Spiral Pvt. Ltd.
Summary of Opinion (Presiding Member: V.K. Jain)
Factual and Procedural Background
The complainant sent a cheque by courier to M/s Salasar Steel and Power Ltd. (to its sister concern at Raipur). The cheque was allegedly encashed by an individual named Tapan Kumar of Jamshedpur. On noticing the encashment, the complainant approached its Bank and was informed that the cheque had been presented in clearing by ICICI Bank, Jamshedpur and had been encashed. Alleging deficiency in service, the complainant filed a Consumer Complaint in the District Forum, impleading Union Bank of India (the petitioner in the present revision), ICICI Bank and the Courier as opposite parties.
The District Forum allowed the complaint against all opposite parties and apportioned liability among them. Union Bank of India appealed to the State Commission; ICICI Bank and the Courier also filed appeals. A preliminary objection taken by the banks before the State Commission was that the complainant was not a "consumer" within the meaning of Section 2(1)(d) of the Consumer Protection Act. The State Commission (as described in the opinion) negatived that plea, allowed the appeals filed by ICICI Bank and the Courier, and directed the petitioner (Union Bank of India) to pay the entire amount which the District Forum had apportioned among the respondents. Aggrieved by the State Commission's order, the petitioner filed the present revision petition before this Commission.
Legal Issues Presented
- Whether a company maintaining a current account with a bank can be regarded as a "consumer" within the meaning of Section 2(1)(d) of the Consumer Protection Act.
- Whether the District Forum had jurisdiction to entertain a consumer complaint where the complainant is a company that availed banking services in the course of its business (i.e., for a commercial purpose).
Arguments of the Parties
Complainant's Position
- The complainant alleged deficiency in service arising from the encashment of a cheque sent by courier; it sought redressal before the District Forum against Union Bank of India, ICICI Bank and the Courier.
Respondents' (Banks') Position
- Union Bank of India and ICICI Bank resisted the complaint and raised a preliminary objection that the complainant was not a "consumer" as defined in Section 2(1)(d) of the Consumer Protection Act (i.e., services were availed for a commercial purpose and thus excluded).
Table of Precedents Cited
| Precedent | Rule or Principle Cited For | Application by the Court |
|---|---|---|
| Sutlej Industries Ltd. v. Punjab National Bank (order dated 8 November 2017) | Reiterated that a limited company maintaining a current account and availing bank services for business purpose falls within "commercial purpose" exclusion under Section 2(1)(d) of the Consumer Protection Act; emphasis on purpose of availing services. | The Commission relied on this view to frame the legal test and to support the conclusion that a company operating a current account for business cannot be a "consumer" under Section 2(1)(d). |
| Laxmi Engineering Works v. P.S.G. Industrial Institute [(1995) 3 SCC 583] | In absence of statutory definition, the ordinary meaning of "commercial" must be applied; "commercial" pertains to commerce/transactions aimed at profit or connected with business. | The court used the ordinary meaning of "commercial" from this authority to interpret Section 2(1)(d) and to conclude that banking services used to promote business activities are commercial. |
| Crompton Greaves Limited v. Daimler Chrysler India Private Limited (order dated 08.07.2016) | Explained that acquisition of goods or hiring/availing services is for a "commercial purpose" when aimed at generating profits or interconnected with business activities of the company. | The Commission cited this authority for the principle that the purpose behind hiring services must be to promote or advance business activities to fall within the "commercial purpose" exclusion. |
| Subhash Motilal Shah v. Malegaon Merchants Co-Op Bank Ltd. (R.P. No. 2571 of 2012; decided 12-02-2013) | Held that a firm or juristic person using a current account for business cannot claim self-employment exception and that banking services connected to business activities are for commercial purpose. | The Commission relied on this decision to show precedent where similar factual matrix (current account used for business) resulted in exclusion from "consumer" protection. |
| Sam Fine O Chem Limited v. Union Bank of India (C.C. No. 39 of 2013; decided 12-04-2013) | Bank credit facility obtained for expansion of manufacturing activity was a commercial purpose and thus the complainant did not qualify as a "consumer" under Section 2(1)(d). | Used to reinforce the principle that banking services rendered in furtherance of business objectives are excluded from consumer protection. |
| Samkit Art & Craft Pvt. Ltd. v. State Bank of India (CC No. 11 of 2007; decided 14-10-2014) | Obtaining cash credit/term loan for export of goods was a commercial purpose; the company was not a "consumer" under Section 2(1)(d). | Applied as another instance where financial services availed for business/export were held to be commercial, supporting the present conclusion. |
Court's Reasoning and Analysis
The Commission proceeded by first establishing undisputed facts: the complainant is a company incorporated under the Companies Act, had a current account with Union Bank of India, and the cheque in question was issued in the course of the complainant's business. The starting legal point was Section 2(1)(d) of the Consumer Protection Act, which defines "consumer" but excludes persons who avail services for a "commercial purpose"; the explanation to that clause excludes only self-employment from the meaning of "commercial purpose."
Relying on precedents of this Commission and the Supreme Court, the opinion interpreted "commercial purpose" through ordinary meaning (citing Laxmi Engineering Works) and applied the test that services are commercial when they are connected with or interwoven into the business activities of the company and are aimed at generating profit or advancing business activities (citing Sutlej Industries, Crompton Greaves and other decisions).
The Commission then applied those principles to the facts: a current account opened and used to run the company's business shows the bank's services were availed for the commercial purpose of carrying out and advancing business activities. Because the services were for a commercial purpose, the complainant did not fall within the statutory definition of a "consumer." As a result, the District Forum lacked inherent jurisdiction to entertain the consumer complaint.
On this basis the impugned orders of the District Forum and the consequential orders were set aside and the complaint was dismissed. The Commission explicitly noted that dismissal on jurisdictional grounds did not bar the complainant from pursuing other remedies available in law and observed that, if the complainant approaches a civil court, it may seek benefit of Section 14 of the Limitation Act.
Holding and Implications
HOLDING: The impugned orders are set aside and, consequently, the complaint is dismissed.
Implications:
- Direct effect on the parties: The consumer complaint against Union Bank of India (and as set out, the orders of the District Forum) is dismissed because the complainant, being a company that availed banking services for commercial purposes, is not a "consumer" under Section 2(1)(d) of the Consumer Protection Act.
- Jurisdictional consequence: The District Forum did not have inherent jurisdiction to entertain the consumer complaint in these circumstances.
- Alternative remedies: The dismissal does not preclude the complainant from pursuing other legal remedies (for example, in civil courts), and the complainant may seek relief under appropriate provisions such as Section 14 of the Limitation Act if applicable.
- Precedential effect: The opinion applies and reiterates existing principles from earlier decisions concerning the interpretation of "commercial purpose" and the exclusion from the definition of "consumer." The opinion does not expressly state that it is laying down a new precedent beyond applying and following the cited authorities.
V.K. Jain, Presiding Member:— Complainant sent a cheque by courier to one M/s Salasar Steel and Power Ltd., to its sister concern, at Raipur. The aforesaid cheque was allegedly encashed by one Tapan Kumar of Jamshedpur. On noticing the encashment of the cheque, the complainant took up the matter with the Bank and was informed that the cheque had been presented in clearing by ICICI Bank, Jamshedpur and had been encashed. Alleging deficiency in service rendered to it the complainant approached the concerned District Forum by way of Consumer Complaint, impleading Union Bank of India, ICICI Bank as well as the Courier as the OPs in the complaint.
2. The complaint was resisted by the petitioner Bank as well as ICICI Bank which took a preliminary objection stating that the complainant was not a consumer within the meaning of Consumer Protection Act.
3. The District Forum allowed the complaint against all the OPs and also directed the apportionment of the liability amongst all the OPs.
4. Being aggrieved by the order passed by the District Forum the petitioner Union Bank of India filed an appeal before the concerned State Commission. Appeals were also filed by ICICI Bank and the Courier. One of the contentions advanced before the State Commission was that the complainant was not a consumer within the meaning of 2(1)(d) of the CP Act. The said plea was negatived by the State Commission which allowed the appeal filed by the ICICI Bank and the Courier and directed the petitioner to pay the entire amount which the District Forum had directed to be apportioned amongst the OPs/respondents.
5. Being aggrieved, petitioner is before this Commission by way of this revision petition.
6. It is not in dispute that the complainant is a company registered under the provision of Companies Act. It is also not in dispute that the complainant had opened a current account with the petitioner - Bank - Union Bank of India. The cheque which the petitioner Bank had honoured was indeed in favour of a business associate/supplier of the complainant. The cheque in question was issued by the complainant in the course of the business.
7. The question as to whether a company maintaining a current account with the Bank can be said to be a consumer within the meaning of CP Act has come up for consideration of this Commission in several decisions of this Commission. The view taken by this Commission in Sutlej Industries Ltd. (S) v. Punjab National Bank (S). decided on 8 November 2017, reads as under:
“4. It is an admitted position that the appellant/complainant is a limited company. It is also an admitted position that the bank account in respect of which negligence/deficiency on the part of the respondent is alleged, was a current account. Even otherwise a company is not permitted to open savings bank account with a bank.
5. Section 2(1)(d) of the Act to the extent it is relevant provides that though consumer means any person who hires or avails of any services for a consideration, it does not include a person who avails of such services for any commercial purpose. The explanation attached below the aforesaid clause, to the extent it is relevant, stipulates that commercial purpose does not include use by a person, of the services availed by him, exclusively for the purpose of earning his livelihood by means of self-employment. It would thus be seen that emphasis is on the purpose for which the goods are purchased or the services are hired or availed.
The term ‘commercial purpose’ has not been defined in the Consumer Protection Act and as held in Laxmi Engineering Works v. P.S.G Industrial Institute . [(1995) 3 SCC 583], in the absence of a statutory definition, we have to go by its ordinary meaning. ‘Commercial’ denotes ‘pertaining to commerce’ (Chamber's Twentieth Century Dictionary); it means “connected with, or engaged in commerce; mercantile, having profit as the main aim” (Collin's English Dictionary) and the word ‘commerce’ means “financial transactions, especially buying and selling of merchandise on a large scale” (Concise Oxford Dictionary)”. As observed by a three members Bench of this Commission vide its order dated 08.07.2016 in CC No. 51 of 2006 Crompton Greaves Limited v. Daimler Chrysler India Private Limited, acquisition of the goods or the hiring or availing of services, in order to bring the transaction within the purview of Section 2(1)(d) of the Consumer Protection Act, therefore, should be aimed at generating profits for the company or should otherwise be connected or interwoven with the business activities of the company. The purpose behind such acquisition should be to promote, advance or augment the business activities of the company, by the use of such goods or services.
If the business activities of a company cannot be conveniently undertaken without the goods purchased or the services hired or availed by a company, such purchase or hiring/availing as the case may be, would be for a commercial purpose, because the objective behind such purchase of goods or hiring or availing of the services would be to enable the company to earn profits by undertaking and advancing its business activities.
6. In Subhash Motilal Shah v. Malegaon Merchants Co-Op Bank Ltd., R.P. No. 2571 of 2012 decided on 12-02-2013, the petitioner which had a current account with the bank had alleged deficiency in service on the part of the bank. The State Commission dismissed the complaint, holding inter alia as under:
“Admittedly, since Rainbow Corporation is a firm of Ajay Subhash Shah (HUF), i.e., juristic person, there arise no question of self-employment so as to cover the case under explanation to Section 2(1)(d)(ii) of the Consumer Protection Act, 1986 (‘Act’ for brevity). It is a case relating to an action related with services given while operating the Current Account of Appellant Rainbow Corporation which was admittedly opened and used for business purpose, of the business of ‘commission agent’ and business of ‘yarn sale’. Therefore, since the account itself is connected and related to the business transactions and such banking activity is required for the functioning of a given business enterprise of the appellant/complainant, services hired for that purpose would fall within the category of hiring services for commercial purpose. A useful reference can be made to free dictionary by FARLEX (on Internet) which defines the ‘Business Activity’ as the activity undertaken as a part of commercial enterprise. Further, reference can be made to an article available on the internet Website Wise Geek (copyright protected 2003-12 by Conjecture Corporation) and which is written by Alexis. W, edited by Heater Bailey. Under the circumstances, prima facie appellant/complainant Rainbow Corporation cannot be a consumer within the meaning of Section 2(1)(d)(ii) of the Act”.
Being aggrieved from the order of the State Commission, the complainant in the said case approached this Commission by way of a revision petition and it was contended by the complainant that considering the aims and objectives behind enactment of the Act, the expression ‘consumer’ and ‘service’ as defined under the Act should be construed in a comprehensive manner so as to include the services of commercial and trade oriented nature. In other words, the contention was that any person who hires services for consideration shall be deemed to be a consumer, even if the services were obtained in connection with a commercial activity. However, relying upon the amendment made in the Act with effect from 15-03-2003 the revision petition was dismissed by this Commission thereby upholding the view taken by the State Commission.
7. In Sam Fine O Chem Limited v. Union Bank of India, C.C. No. 39 of 2013, decided on 12-04-2013, the complainant had availed credit facility from Union Bank of India. Alleging deficiency in the services provided by the bank he preferred a complaint before this Commission. Rejecting the complaint this Commission inter alia noted that the complainant had availed the credit facility service of the bank for expansion of its manufacturing activity which was a commercial purpose and, therefore, the complainant did not fall within the definition of ‘consumer’ given in Section 2(1)(d) of the Act.
In CC No. 11 of 2007, Samkit Art & Craft Pvt. Ltd. v. State Bank of India, decided on 14-10-2014, the complainant which was engaged in the business of export had obtained cash credit limit and term loan facility from the State Bank of India. He filed a complaint alleging deficiency on the part of the bank in the services rendered to him. It was held by this Commission that obtaining cash credit facility for the purpose of export of goods was a commercial purpose and, therefore, the complainant company was not a consumer within the meaning of Section 2(1)(d) of the Consumer Protection Act.
8. The complainant/appellant had opened a current account with the respondent bank for the purpose of carrying out its business activities. The purpose behind opening the said account therefore was to serve the commercial interests of the company. Therefore, it can hardly be disputed that the services of the bank were hired or availed by the complainant for a commercial purpose”.
8. In view of the aforesaid pronouncement of this Commission, it can hardly be disputed that the complainant cannot be said to be a consumer within the meaning of Consumer Protection Act, as it had hired/availed the services of the petitioner Bank for commercial purpose, i.e., for running a current account for its business purposes. The District Forum therefore, did not have inherent jurisdiction to entertain this Consumer Complaint. The impugned orders are therefore, set aside and consequently the complaint is dismissed. It is however, made clear that dismissal of the complaint shall not come in the way of the complainant availing such remedy other than a consumer complaint as may be open to it in law. In the event the complainant approaches the civil court for redressal it may also seek the benefit of provisions of Section 14 of the Limitation Act.
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