Jul 10, 2024 08:37 AM IST
The court noted that the absence of evidence linking the car purchase to any profit-generating activity meant the purchase could not be deemed commercial.
The Supreme Court on Tuesday held that a company purchasing a vehicle for the personal use of its directors or employees cannot amount to a purchase for “commercial purpose” under the consumer protection law in the absence of evidence linking the vehicle purchase to any profit-generating activity.
A bench of justices Bela M Trivedi and Pankaj Mithal held that there cannot be a legal presumption that purchase of a vehicle by a company must be with linked with commercial purpose of earning profit, adding that the burden of proof lies on the entity claiming the purchase to be for commercial purposes.
The judgment elucidated that the definition of “consumer” excludes individuals or entities that obtain goods for “resale” or “any commercial purpose”. While the Consumer Protection Act does not define “commercial purpose”, the bench noted, the term has been interpreted through various decisions by the top court.
In the case of Laxmi Engineering Works Vs PSG Industrial Institute (1995), the court concluded that determining whether a purchase was for “commercial purpose” is always a question of fact dependent on the circumstances of each case. Similarly, the 2020 judgment in Lilavati Kirtilal Mehta Medical Trust Vs Unique Shanti Developers held that while there is no strict formula for every case, the dominant intention or purpose behind a transaction must be examined. If the purchase is aimed at profit generation, it is likely to be considered commercial, noted the bench.
“The purchase of the goods should have a close and direct nexus with a profit generating activity. It has to be seen whether the dominant intention or dominant purpose for the transaction was to facilitate some kind of profit generation for the purchaser and/or their beneficiary,” it pointed out.
In the case at hand, Controls and Switchgear Company Ltd purchased two luxury cars for use by its whole-time executive directors as part of their perquisites. The cars were used for personal use by the directors and their immediate family members. Daimler Chrysler India Pvt Ltd (now known as Mercedes Benz India Pvt Ltd), argued that the absence of certain documents meant the cars were purchased for commercial purposes.
However, the court dismissed this argument, stating that when a consumer alleges defects in goods and the seller contests the complaint on grounds of commercial purpose, the onus to prove the commercial purpose lies on the seller, not the consumer. In this instance, the respondent-complainant had asserted that the cars were purchased for personal use, with no evidence suggesting a commercial purpose.
The court noted that the absence of evidence linking the car purchase to any profit-generating activity meant the purchase could not be deemed commercial.
The court also highlighted a complaint relating to excessive heating of the centre portion as well as the floor of the car. “People do not purchase the high-end luxurious cars to suffer discomfort more particularly when they buy the vehicle keeping utmost faith in the supplier who would make the representations in the brochures or the advertisements projecting and promoting such cars as the finest and safest automobile in the world,” it noted.
As a result, the court upheld the national consumer commission’s 2007 order directing the car company to refund the purchase price of approximately ₹58 lakh and take back the car. However, considering the use of the car for 17 years and an earlier offer by the car company to repurchase the car at a depreciated value, the court modified the compensation to ₹36 lakh while asking the purchaser firm to retain the vehicle.
