National Consumer Disputes Redressal
Jindal Drilling And Industries Ltd. vs Indocon Engineers Pvt. Ltd. And Anr. on 8 August, 2005
Equivalent citations: 3(2006)CPJ264(NC)
ORDER
P.D. Shenoy, Member
1. The case of the complainant, in brief, is that the complainant ordered fora Nitrogen Generator with a capacity of 400 NM3/hr whereas at no point of time after its installation and commissioning it reached a level of beyond 300 NM3/hr. resulting in continuous loss to the purchaser Pleadings of both the parties:
2. The complainant company, M/s. Jindal Drilling and Industries Ltd. had placed an order with opposite party No. 1, M/s. Indcon Engineers Pvt. Ltd. for the supply and commission of Nitrogen Generator which the opposite party No. 1 had undertaken to deliver by February, 1996 and to commission the same thereafter. The opposite party had also given warranty for the proper trouble free working. The value of the order was Rs. 73.424 lacs. As the equipment failed to give performance of the committed level, the complainant wrote several letters to O.P. No. 1. The complainant prayed that the opposite party may be directed to refund of Rs. 69,24,520 (Rupees sixty nine lacs twenty four thousand five hundred twenty only) which the opposite parties have received from the complainant along with interest @ 24% per annum.
3. The opposite parties in their reply have inter alia contended that the complaint is not maintainable inasmuch as the complainant is not a consumer within the meaning and definition of word 'consumer' under Section 2(1)(d) of the Consumer Protection Act, 1986; secondly, the plant was successfully commissioned and hence no grievance can be raised against the opposite parties. In addition they have stated that it is not a case where the opposite parties were bound to provide services as it is only the plant which was to be supplied and was to be erected and commissioned and nothing beyond this was to be done by the opposite parties. Therefore, the question of any kind of negligence, failure or deficiency in service does not arise at all.
Submissions made by the learned Counsel for the complainant
4. (a) The learned Counsel for the complainant, submitted that M/s. Indcon Engineers Pvt. Ltd. had deliberately supplied a machine producing lesser efficiency though the order was placed for a nitrogen generator with a capacity of 400 NM3/hr. Soon after installation, it generated only 240 NM3/hr. It is not in dispute that the full payment has been made and it is a clear case of deficiency in service and deception. Opposite party No. 1 agreed to provide guarantee for a period of 12 months from the date of commissioning for all types of manufacturing defects during the guarantee period. The plant was commissioned in September 1996 and from the day one assured production level was never reached i.e. 400 NM3/hr. The commissioning of the plant was done by the seller himself.
(b) A joint meeting between the buyer and seller was arranged on 30.1.1997 and the minutes read as follows:
At present the V Belt of compressor is getting wearing out frequently. MVS informed that they will depute CPT representative for checking proper alignment and pulley.
Some pressure gauges got damaged-exceeds the limit-to be replaced.
(c) Learned Counsel for the complainant submitted that it is apparent that plant was not working properly has been further elucidated in the letter of buyer dated 10.2.1997 requesting the seller to send their engineer Mr. Mohd. Afsar who did not come to carry out the repairs. On further correspondence, the engineer came but left the site without repairing the machine, in question.
(d) The seller has admitted the defects as can be seen from the extracts of the joint minutes which read as follows:
Air compressor suction filter cover were opened by MVS to increase the flow but it is giving heavy noise. Also not good for life of the compressor.
The volume of gas to furnace has been increased to 300 NM3/hr. but it was not stable and the storage tank pressure dropped down so again the flow has brought down to 280 NM3/ hr. Mr. Afsar of MVS informed that he will arrange flow rate demonstration later by their Bombay office engineer.
(e) The purchaser consulted the only independent expert agency available in the field at Delhi i.e. Airox Nigen Equipment Pvt. Ltd. After thorough study they gave a report which reads as follows:
They have thoroughly studied each and every part and equipments of the plant and the process parameter in operating condition of this plant and in nutshell they wish to inform that the shortcomings in the performance (Capacity and Purity) and problem faced by the company in the plant operation are not because of any maintenance or site condition but these are because of under designing with regard to the capacity of the plant and because of using inferior and cheaper bought out equipments and also due to absence of many of the major essential parts. These all are probably done for saving a huge amount of money.
(Emphasis supplied)
(e) After giving final opportunity to the seller through registered letter, a legal notice was sent in which they had stated that despite several letters no action was taken to rectify the machine, hence they claimed compensation to tune of Rs. 77,87,000 together with interest from the date of filing the complaint i.e. 30.3.1997 @ 24% per annum and also direction from this Commission for returning of Rs. 69,24,520 along with interest 24% per annum which the opposite parties have received from the complainant.
Submissions made by the learned Counsel for the opposite parties
5. Learned Counsel for the opposite party No. l submitted that the complainant is not a consumer as he has bought this machine for a commercial purpose and accordingly he quoted Section 2(1)(d) of Consumer Protection Act, 1986 wherein exclusion is provided when the goods are bought for resale or for any commercial purpose. As the complainant has bought this machine for commercial purpose, it is not a consumer. To support his case, he quoted two decisions of this Commission and one of Hon'ble Supreme Court.
1. Laxmi Engineering Works v. P.S.G. Industrial Institute, in Civil No. 4193 of 1995 arising out of S.L.P. (Copy Right) No. 6290 of 1994, D 4-4-1995 II .
2. Synco Textiles Pvt. Ltd. v. Greaves Cotton & Co. Ltd. I (1991) CPJ 499 (NC) in First Appeal No. 22/1989 decided on 6.4.1990 by this Commission.
3. Curewell Hospital Pvt. Ltd. v. Kohli Medical GasesPvt. Ltd. and Another in Original Petition No. 85/1991 decided on 9.4.1992 by this Commission.
6. Hence, the complainant is not a consumer as he has bought this machine purely for commercial purpose. Accordingly, he cannot get the benefit of Consumer Protection Act, 1986. There was no defect found when plant was commissioned. The complainant did not inform the respondent about the appointment of specialist/expert: Airox Nigen Equipment Pvt. Ltd. Hence the report is not valid. Even before the warranty period was over, so called legal notice was issued as early as on 28.4.1997. Loss mentioned in the legal notice as well as in the complaint are neither quantified nor backed up by any evidence. Instead of asking the respondent to take back the plant and pay them the amount, they only wanted damages. Only to avoid Court-fee, they have filed this complaint in the Consumer Fora.
7. The issues which arise for determination are as follows:
1. Whether the complainant Indcon Engineering Pvt. Ltd. which had bought Nitrogen Generator Machine from opposite party No. l, is a consumer?
2. Whether the machine supplied conformed to the standard as per agreement between the parties? If not, whether there were any manufacturing defects and accordingly was there any deficiency in service?
3. If there was deficiency in service, whether the complainant is eligible for compensation and if so what it should be?
Findings:
8. The learned Counsel for opposite party No. 1 has quoted 3 judgments with a view to prove that the complainant is not a consumer.
(a) In Laxmi Engineering Works mentioned above, the Apex Court held that a proprietary concern entered into an agreement with a company for supply of certain parts to be used by the company in its product as the machinery was supplied beyond the stipulated time and was also defective. The purchaser made a complaint against the company. Hence, the company held that the machine purchased was not goods purchased by the purchaser for use by himself exclusively for purpose of earning his livelihood by means of self-employment. Hence the complaint is not maintainable under the Consumer Protection Act, 1986.
(b) In the Synco Textiles Pvt. Ltd.'s case mentioned above, this Commission held that the purchase of the generating sets was, thus, clearly for enabling the appellant company to carry on its commercial activity of manufacturing edible oils on a large scale for purposes of trade. There is commercial production of edible oil. There is a close and direct nexus between the purpose of purchase of the generating sets and the commercial activity.
(c) In Cumvell Hospital Pvt. Ltd.'s case, this Commission held that the contention of the petitioner that the purchase and installation of the CGP System will amount to "service" to be rendered by the opposite parties is not acceptable. The question of service, if any would have arisen only after the CGP System had been installed and commissioned. Till the system was installed in the hospital, it will amount to purchase of the System i.e. purchase of "goods" which as discussed above, was clearly for commercial purpose.
(d) As against these decisions, subsequently this Commission has held that if any goods are purchased and are found to be defective during the warranty period then the goods/machine has to be replaced or has to be compensated as he comes within the ambit of definition of "Consumer" even if the goods or, the machines were used for commercial purposes. This has been fortified by the decisions of the Commission in the following cases:
(e) Meera & Co. Ltd. v. Chittar Synten Ltd. II (2004) CPJ 24 (NC) : (2004 CTJ 1086 (CP) (NCDRC), this Commission has held that even if the generating set purchased by the complainant for a commercial purpose, it suffered the alleged defects during its warranty period of one year and, therefore, the complainant was well within its right to move the Consumer Forums under the Act, it being a consumer of the opposite party's service. This Commission also mentioned that if any authority is needed on that settled position in law, reference may be made to the decision in Amtrex Ambience Ltd. v. M/s. Alpha Radios and Anr. I (1996) CPJ 324(NC).
(f) In Amtrex Ambience Ltd.'s case this Commission has held that where the allegation of the complainant was that there was malfunctioning of the machinery/equipment during the period of warranty when the manufacturer had undertaken to keep the machinery in good working condition, even if sold for commercial purpose, the purchaser will certainly be a consumer under Section 2(1)(d)(ii) in respect of services x-endered or to be rendered by the seller for the proper functioning of the machinery/ equipment, system during the period of warranty. The complainant had filed an affidavit to the effect that the opposite parties failed to rectify the defects in the malfunctioning of the airconditioning system during the warranty period.
Accordingly, ratio of the decision in the cases quoted by the learned Counsel for the opposite parties are different from above mentioned two cases. In a catena of judgments, this Commission has held that though the goods are purchased for commercial purpose if defects are noticed during the warranty period, the purchaser becomes a consumer and the supplier of the machine has to compensate the purchaser by either repairing the goods, replacing the goods or refunding the amount. Hence, the three cases quoted will not be of any assistance to the respondent.
(g) It is clear from the records that Nitrogen Generator Machine did not reach capacity of 400 NM3/hr. at any date after its installation. It is also on record that complainant has written around 20 letters to the respondents requesting them to rectify the defects. Further the extracts of the joint meetings quoted by the complainant's Counsel have not been rebutted, which clearly indicates the existence of the manufacturing defects in the machine and it is a clear proof that at no point of time the machine crossed the level of 300 NM3/hr. though promised design capacity was 400 NM3/hr. Airox Nigen Equipments Pvt. Ltd. considered to be an expert agency in this field had mentioned that-
You may please note that this plant cannot achieve a capacity of 400 NM3/hr. as ordered and desired by you without making the necessary changes and any effort to do it by R & Deven spoil those results which you are getting at present
(h) The seller has not produced any other evidence from any expert agency to rebut or controvert this report except stating that this has been procured without giving notice to them. Hence it is clear that machine was defective from day one and did not produce promised nitrogen. Accordingly, the complainant has made out a clear case of deficiency of service.
9. Last issue to be decided by us is that what is the reasonable compensation to be awarded? It is not in dispute that the machine has not been sent back to the buyer and is still in operation With its reduced capacity. It is providing reduced quantity of nitrogen. From the findings of Airox Nigen Equipment Pvt. Ltd., we got a clue. The findings are as follows:
You have only two options to choose from i.e. either operate this plant at about 225 NM3/lir. with some minor changes or if you can invest then add all the necessary things required in this to make it a plant of 400 NM3/hr.
(Emphasis added)
10. This means that with minor changes the company can operate the plant with the capacity of only 225 NM3/hr. Accordingly, loss canbecomputed @ 175/400. Costof the machine is Rs. 69,24,520. The plant was installed on 30.3.1997. Accordingly, we direct the opposite party to pay within four weeks a sum of Rs. 30, 29,477.50 (Rs. 69,24,520 x 175/400 : Rs. 30,29,477.50) with 9% interest per annum from the date of installation of machine till the date of payment. Parties will bear their own costs.