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Judgment
APPELLANTS which were the opposite party Nos. 1 to 3 before the State Commission have filed these Appeals against the judgment and order dated 26.10.2007 passed by the State Consumer Disputes Redressal Commission, Karnataka (in short, ''the State Commission'') in Complaint Case No. 67/05 wherein the State Commission allowing the complaint has directed the Appellants to replace the "Cater Filler 424 Series 1 Backhoe Loader" supplied to the Complainant/Respondent No. 1 with a defect free new Cater Filler 424 Series 1 Backhoe Loader and to pay a sum of Rs. 2,00,000 jointly and severally as compensation to the Complainant or in the alternative to refund Rs. 18,00,000 to the Complainant along with interest @ 18% p.a. from the date of purchase of the machine i.e. 14.11.2004 till realization after taking back the defective machine. Rs. 10,000 were awarded towards costs. Complaint against the Opposite Party No. 4 was dismissed. Facts:
Complainant/Respondent No. 1 (hereinafter referred to as the "Respondent") purchased one "Cater Piller 424 Series 1 Backhoe Loader" (for short the "machine") manufactured by the Appellant in First Appeal No. 716 of 2007 (O.P. No. 1 before the State Commission and hereinafter referred to the "Appellant") from its authorized dealer, M/s. GMMCO Ltd., Appellants in First Appeal No. 729/07 (opposite party Nos. 2 and 3 before the State Commission and hereinafter referred to as the "dealer") on 14.11.2004 for a sum of Rs. 18,10,000 after raising a loan from ICICI Bank. M.R.F. Ltd. (opposite party No. 4 before the State Commission) was the manufacturer of the tyres that were fitted to the machine purchased by the Complainant/Respondent. Immediately after the purchase of the machine, Respondent noticed various defects in the machine in respect of Boom Cylinder Assembly, tyres, Backhoe Bucket, Boom Arm Crack, etc. Respondent requested the dealer to replace the machine to which it did not respond except to attend the minor repairs and welding. Complainant, being aggrieved, filed the complaint before the State Commission seeking replacement of the machine or refund of the sale consideration along with compensation, interest and cost.
ON being served, Appellant -manufacturer, entered appearance and filed its written statement resisting the complaint on the grounds that the relationship between the Appellant and the dealer was on "principal to principal basis" and not "principal and agent" basis; that the Respondent was not a "Consumer" as defined under Section 2(1)(d) of the Consumer Protection Act, 1986 (for short, "the Act") as the Respondent hired out the machine along with the operator. Dealer contested the complaint on the ground that the complaint filed by the Respondent was not maintainable as the machine was purchased for ''commercial purposes''. MRF Ltd. resisted the complaint stating that the tyres which were fitted to the machine were not purchased from it.
STATE Commission rejecting the contentions raised by the Appellant and the dealer on the maintainability of the complaint, held that the complaint filed by the Respondent was maintainable.
STATE Commission on the maintainability of the complaint observed as under: The OPs have pleaded that the machine was purchased by the complainant for a ''commercial purposes'' and, therefore, he is not a ''consumer'' as defined under Section 2(d) of the Act. It is not the case of the OPs that the Complainant has not produced any evidence to show that he is doing any other business other than using of the machine for the purpose of eking out his livelihood. If that is the case, the very purchase of the Machine by the Complainant is for his livelihood. Further, even if the Machine is being used for Commercial Purpose it does not mean that the OPs could sell a defective Machine. Besides this, the Machine so purchased by the Complainant is not for re -sale but for his livelihood. Therefore, the Complaint filed by the Complainant cannot be thrown out on the ground of maintainability, if the Complainant were to establish that there are manufacturing defects in the Machine. Accordingly, we hold that the Complaint filed by the Complainant is maintainable in law.
State Commission relying upon the report of the Local Commissioner appointed by it to ascertain whether there were any manufacturing defect in the machine, allowed the complaint and directed the Appellant and the dealer to replace the "Cater Piller 424 Series 1 Backhoe Loader" supplied to the Complainant/Respondent No. 1 with a defect free new Cater Piller 424 Series 1 Backhoe Loader and to pay a sum of Rs. 2,00,000 jointly and severally as compensation to the Complainant or in the alternative to refund Rs. 18,00,000 to the Complainant along with interest @ 18% p.a. from the date of purchase of the machine i.e. 14.11.2004 till realization after taking back the defective machine. Rs. 10,000 were awarded towards costs. Complaint against the opposite party No. 4 was dismissed.
ON merits, State Commission in its order held as under: 10. From a reading of the Report of the Commissioner it is clear that the Machine is in an immobile condition. The collar part of Backhoe Bucket hinged to Boom stick found welded and the same was not designed properly to withstand fatigue load. The chronic failure/cracking of collar part of Backhoe Bucket could be an indication of manufacturing defect. A reading of the entire Report of the Commission disclosed that there are several manufacturing defects in the Machine. So far as the Tyres are concerned, there is no Report regarding the defects alleged in the Tyres.
When the Complainant has purchased the Machine by paying huge amount that too by borrowing money from Bank he expects that he could make use of the Machine for " the purse for which he has purchased the same. In the instant case, because of the above said defects the complainant could not make use of the machine. The Machine is also in immobile condition. The report of the Commissioner also has not been objected by any of the parties by filing objections. Therefore, we are of the view that there are several manufacturing defects in the Machine.
APPELLANT as well as the Dealer, being aggrieved, have filed the present Appeals for setting aside the impugned order passed by the State Commission. We have heard the learned Counsel for the parties at length.
Respective learned Counsel appearing for the Appellant -manufacturer and the dealer contend that the State Commission has erred in holding that the Respondent was a "consumer" within the meaning of Section 2(1)(d)(ii) of the Act; that the machine was purchased for commercial purpose for earning profits but not by way of self -employment; that the machine had already worked for 3300 hours and Respondent had earned Rs. 21,45,000 from it; that the Respondent had admitted in the complaint that the machine was purchased for hiring out along with an operator for the purposes of digging, excavating, lifting and loading earth and other heavy materials. In support of their contention, learned Counsel for the Appellant and the Dealer have relied upon the judgment of the Hon''ble Supreme Court in the case of Laxmi Engineering Works v. P.S.G. Industrial Institute, : II (1995) CPJ 1 (SC) : (1995) 3 SCC 583, and the judgments of this Commission in the cases of Consumer Complaint No. 155 of 2008 titled as Sanjay D. Ghodawat v. M/s. R.R.B. Energy Ltd. : IV (2010) CPJ 178 (NC), decided on 17.12.2009 and R.P. No. 2043 of 2006 titled as Mohammad Haseeb Ahmad v. Deputy Executive Engineer, Maharashtra State Electricity Board,, III (2010) CPJ 242 (NC), decided on 21.5.2010. As against this, learned Counsel for the Respondent supports the order passed by the State Commission.
THE question which falls for our consideration in the present case is, as to whether the Complainant is a "Consumer"? Hon''ble Supreme Court in Laxmi Engineering''s case (supra), has held 17 years back that if a person buys goods for re -sale or commercial purposes, he cannot be considered to be a ''consumer'' falling within the meaning of Section 2(1)(d) of the Consumer Protection Act, 1986. The facts of the case were that the Complainant, a proprietary concern had purchased a PSG 450 CNC Universal Turning Central Machine on 28.5.1990 from the Respondent, P.S.G. Industrial Institute for Rs. 21 lakh. It was alleged that the Respondent supplied a defective machine as a result of which the Complainant concern suffered huge financial losses. A complaint was filed before the State Commission, Maharashtra claiming an amount of Rs. 4,00,000 on several counts. Respondent raised a preliminary objection that the complaint was not maintainable as the Complainant had purchased the machine for "commercial purposes". That it was not a "consumer" within the meaning of Section 2(d) of the Consumers Protection Act. State Commission overruling the said objection, allowed the complaint and directed the Respondent to pay a sum of Rs. 2.48 lakh to the Complainant. Respondent preferred an appeal before this Commission which was allowed on the ground that the Complainant was not a "Consumer" as defined under the Act because the Complainant was carrying on the business of manufacture of machine parts on a large scale for the purpose of earning profit. In appeal, before the Hon''ble Supreme Court, Counsel for the Complainant took the plea that the Complainant firm was a small -scale industry and the said machine was purchased by it for the purpose of earning livelihood. That the proprietor of the Complainant concern was a diploma holder in Engineering and he had started a small scale industry with the financial assistance from public financial institutions to earn his livelihood. Hon''ble Supreme Court dealing this question in extenso held as under: So far as the present case is concerned, we must hold (in agreement with the National Commission) having regard to the nature and character of the machine and the material on record that it is not goods which the appellant purchased for use by himself exclusively for the purpose of earning his livelihood by means of self -employment, as explained hereinabove.
HOWEVER , the Hon''ble Supreme Court in the said judgment created an exception holding that "commercial purposes" would not cover a consumer who has bought or used the goods exclusively for the purpose of earning is livelihood by means of self -employment. That the complaint filed by such a ''consumer'' would be maintainable. The exception created by the Supreme Court in the aforesaid case was incorporated in the Act by the Legislature by adding an explanation to Sections 2(1)(d)(i) and (ii) by the amending Act of 62 of 2002 which came into force with effect from 15.3.2003. Section 2(d) reads as under: (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 service 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 purposes (Added by Act 62 of 2002 w.e.f. 15.3.2003).
Explanation - -For the purposes 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.
(Emphasis supplied)
By the explanation, an exception was created providing that the words "commercial purpose" used in the sub -clause would 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.
AS per the following averments made by the Respondent in his Complaint in para No. 6, it is evident that the machine was being used for commercial purposes and not by way of self -employment: Complainant was not gainfully employed, in view of which the Complainant purchased the said machine for the purpose of earning his livelihood by hiring out the machine along with an operator to persons who need it on hire charges. The Complainant does not own any other such machine.
ADMITTEDLY , the machine was purchased by the Respondent for hiring out along with the operator to persons who need it on hire charges at the rate which normally works out to Rs. 650 per hour. It is difficult to comprehend as to how earning large scale profits can merely be termed as "earning livelihood" by way of self -employment. According to the Appellant -manufacturer and the dealer, the machine had already worked for 3300 hours at the time of filing of the complaint, i.e. just after one year from the date of its purchase and had generated the sum of Rs. 21,45,000. It is not a case of earning livelihood by means of self -employment Machine was being used by the Respondent for giving it on hire which clearly shows that it was not by way of self -employment. The use of the machine for commercial purpose is excluded from the purview of the Consumer Protection Act, 1986. The question of warranty does not arise in the present case. Hon''ble Supreme Court in the case of Birla Technologies Ltd. v. Neutral Glass and Allied Industries Ltd. : I (2011) CPJ 1 (SC) : IX (2010) SLT 396 : (2011) 1 SCC 525, after taking into consideration the amendment introduced in the section by way of explanation has held as under: It seems that the whole error has crept in because of the wrong factual observation that the complaint was filed on 1.8.2000. In that view, it has to be held that the complaint itself was not maintainable, firstly, on the count that under Section 2(1)(d)(i), the goods have been purchased for commercial purposes and on the second count that the services were hired or availed of for commercial purposes. The matter does not come even under the Explanation which was introduced on the same day i.e. on 15.3.2003 by way of the amendment by the same Amendment Act, as it is nobody''s case that the goods bought and used by the Respondent herein and the services availed by the Respondent were exclusively for the purpose of earning the Respondent''s livelihood by means of self -employment. In that view, it will have to be held that the complaint itself was not maintainable in toto.
WE respectfully follow the law laid down by the Hon''ble Supreme Court. Since the Complainant had purchased the machine for commercial purpose, the complaint filed by him under the Consumer Protection Act, 1986 was not maintainable. Goods purchased or Services availed for commercial activities stands excluded from the definition of ''consumer'' under the provision of the Consumer Protection Act, 1986.
FOR the reasons stated above, the impugned order passed by the State Commission is set aside and the Appeals are allowed. However, Complainant/Respondent is put at liberty to seek redressal of his grievance before the appropriate Court/Forum in accordance with law. It would be open to him to file an application before the Court under Section 4(A) of the Limitation Act for excluding the period spent before the Consumer Fora for the purpose of computation of limitation in terms of the observations made by the Apex Court in the case of Laxmi Engineering Works v. P.S.G. Industrial Institute,, 1995 (2) CPC 2. Vide order dated 7.1.2008, this Commission had directed the Appellant, Cater Piller India Ltd. to deposit Rs. 5,00,000 with the State Commission. State Commission is directed to release the deposited amount to the Appellant along with accrued interest, if any. Registry is also directed to refund the sum of Rs. 35,000 deposited by the Appellant as statutory deposit along with accrued interest.