Supreme Court: In a batch of criminal appeals posing a common question of law, that whether the purchase of a vehicle/good by a Company for the use/personal use of its directors would amount to purchase for “commercial purpose” within the meaning of Section 2(1)(d) of the Consumer Protection Act, 1986 (now re-enacted as Consumer Protection Act, 2019), the Division Bench of Bela M. Trivedi* and Pankaj Mithal, JJ. held that the same cannot be restricted in a straitjacket formula and it has to be decided on case-to-case basis. To determine whether the goods purchased by a person (which would include a legal entity like a company) were for a commercial purpose or not, within the definition of a “consumer” as contemplated in Section 12 2(1)(d) of the said Act, would depend upon facts and circumstances of each case.
The Court stated that ordinarily “commercial purpose” is understood to include manufacturing/industrial activity or business-to-business transactions between commercial entities, the purchase of the goods should have a close and direct nexus with a profit generating activity. It should be seen that 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, and if it is found that the dominant purpose behind purchasing the goods was for the personal use and consumption of the purchaser and/or their beneficiary, or was otherwise not linked to any commercial activity, the question of whether such a purchase was for the purpose of “generating livelihood by means of self-employment” need not be looked into.
Background
In the first appeal respondent no. 1 (original complainant), had purchased two cars for the use by its Directors and were used personally. It was alleged that there were heating defects in one of the cars.
In the Original Petition, the National Consumer Disputes Redressal Commission (‘National Commission’) vide the impugned order, after holding that the Complainant-Company being a legal entity, was entitled to file a Complaint, and that the cars purchased for the use of the directors of the Company, not used for any activity directly connected with commercial purpose of earning profit, could not be said to have been purchased by the complainant-company for “commercial purpose”, directed the Daimler Chrysler India Pvt. Ltd., (now known as Mercedes Benz India Pvt. Ltd.) (‘appellant’) to replace the Car concerned with a new car of the same or similar model, or in the alternative refund its full purchase price, namely one half of the amount of Rs. 1,15,72,280/- which was paid by the complainant to the opposite parties for the purchase of the two vehicles in question and take back the vehicle.
In the second appeal by the appellant and cross-appeal by C.G. Power and Industrial Solutions Ltd., wherein it was alleged that on colliding with a goods, the entire front portion of the car was smashed, however none of the airbags opened, resulting in injuries to the driver and respondent no. 2 suffered grievous injuries. It was alleged that, if the airbags had opened at the right time, as represented by the appellants, the respondent no. 2 might have suffered less or no injuries. The complainants alleged that a misrepresentation was made by the appellants at the time of promotion of the car in question that e-class car had a safety system which included front airbags, side-airbags and window airbags. The National Commission after considering the material on record disposed of the complaint of the complainants directing the appellants to pay a sum of Rs. 5 lakhs to the complainant for the deficiency in the services rendered to it on account of the airbags of the car having not deployed/ triggered and further directed the appellants to pay a sum of Rs. 5 lakhs as compensation to the complainant for the unfair trade practice indulged into by them, and a sum of Rs.25,000/- as cost of litigation.
The appellant’s stand was that the purchase of car/vehicle by a company for the use/personal use of its directors could not be said to be the purchase of vehicle for self-employment to earn its livelihood, but it has to be construed as the purchase of vehicle for “commercial purposes”, and therefore such company would fall outside the purview of the definition of “consumer” within the meaning of Section 2(1)(d) of the said Act.
Analysis and Decision
Regarding the first appeal, the Court said that the complainant had asserted that the car in question was purchased by it for the personal use of its Whole-time Director and for his immediate family members, and the dominant purpose of purchasing the car was to treat it as a part of the perquisite to the Director. Hence, nothing showed the said car was used for any commercial purpose by the complainant. Regarding the heating issue of the centre hump, the Court perused a letter, exchanged between the parties, wherein it was stated by the appellant that “although the area (center hump) was observed to be warm, it is not a defect”. Further, the Court noted that on complaint of excessive heating on the center hump more prominently on long drives out of station, the appellants’ engineers informed the complainant that “on account of the catalytic converter fitted underneath the car, these cars do heat a lot”, and advised that “the matter could be resolved by adjusting the rear air-conditioning vents suitably”. The complainant ultimately sought replacement of the vehicle reiterating the persisting problem of hump heating despite a catena of experiments carried out towards rectification of the malfunctioning of the car, however, the said request was rejected.
Therefore, the Court said that such overheating of the surface of hump and the overall high temperature in the car was a fault, imperfection or shortcoming in the quality or standard which was expected to be maintained by the appellants under the contract with the complainant and hence, was a ‘defect’ within the meaning of Section 2(1)(f) of the Act.
The Court observed that 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.
The Court held that the impugned order passed by the National Commission of awarding the compensation by directing the appellants to refund the purchase price i.e., Rs. 58 lakhs approx. to the complainant and take back the car (vehicle) did not warrant any interference. However, noting that the appellant had already made an offer in the year 2006 to repurchase the car in question as per the market value of the car as of November 2006 to be Rs. 34 lakhs or at the book value of the car as of December 2006 to be about Rs. 36 lakhs, in the interest of justice and balance of equity, the Court permitted the complainant to retain the car in question and the appellant was directed to refund Rs. 36 lakhs instead of Rs. 58 lakhs as directed by the National Commission in the impugned order.
Regarding the second appeal, the Court said that the appellants did not put on record anything to show that they had disclosed either in the Owner’s Manual or in the Brochure about the limited functioning of the airbags, which according to them was an additional safety measure in the car. The Court said that even if it is accepted that the airbags would deploy only when the seat belt was fastened by the passenger, in the instant case, the frontal airbags of the car were not deployed though the driver had already fastened the seat belt. Thus, the Court said that the defect in the car was clearly established so far as non-deployment of frontal airbags was concerned. Further, the Court stated that incomplete disclosure or non-disclosure of the complete details with regard to the functioning of the airbags at the time of promotion of the car, was rightly considered by the National Commission as the “unfair trade practice” on the part of the appellants, and awarded a sum of Rs. 5 lakhs towards it. The Court also added that a trade practice which for the purpose of promoting the sale of any goods by adopting deceptive practice like falsely representing that the goods are of a particular standard, quality, style or model, would amount to “unfair trade practice” within the meaning of Section 2(1)(r) of the Act.
Therefore, the Court upheld the National Commission’s decision awarding Rs. 5 lakhs only towards the deficiency in service on account of the frontal airbags of the car having not deployed at the time of accident.
[Daimler Chrysler India (P) Ltd. v. Controls & Switchgear Co. Ltd., 2024 SCC OnLine SC 1675, Decided on: 09-07-2024]
Advocates who appeared in this case :
For the appellant: Sidharth Sethi, AOR, Avinash Das, Adv., P. S. Sudheer, AOR, Prasouk Jain, Adv., Rabiya Thakur, Adv.,Saurabh Mishra, Adv.,Karan Sinha, Adv., Shalini Nair, Adv.,Komal Gupta, Adv.,Vivek Jain, AOR
For the respondents: Arun Khosla, Adv., M. A. Chinnasamy, AOR, C Raghavendren, Adv., C Rubavathi, Adv., Ch. Leela Sarveswar, Adv., Saurabh Gupta, Adv., Sidharth Sethi, AOR, Avinash Das, Adv., P. S. Sudheer, AOR
