National Consumer Disputes Redressal
M/S. Harsolia Motors vs M/S. National Insurance Co. Ltd on 3 December, 2004
NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION NEW DELHI FIRST APPEAL NO. 159 OF 2004 (From the order dated 1.4.2004 in Complaint No. 107/2003 of the State Commission, Gujarat) M/s. Harsolia Motors Appellant Versus M/s. National Insurance Co. Ltd Respondents FIRST APPEAL NO. 160 OF 2004 (From the order dated 1.4.2004 in Complaint No. 86/2003 of the State Commission, Gujarat) M/s. Diwakar Goiram Porkhayat Appellant Versus M/s. National Insurance Co. Ltd Respondents FIRST APPEAL NO. 161 OF 2004 (From the order dated 1.4.2004 in Complaint No. 99/2003 of the State Commission, Gujarat) M/s. Tractor House Appellant Versus M/s. National Insurance Co. Ltd Respondents BEFORE: HONBLE MR. JUSTICE M.B.SHAH, PRESIDENT MRS. RAJYALAKSHMI RAO, MEMBER. For the Appellant : Mr. S.K.Sharma, with Mr. S.J. Mehta, Advocate. For the Respondent : Mr. P.K.Seth, Advocates. Dt. 3.12.2004 O R D E R
M.B.SHAH, J. PRESIDENT The only question requiring decision in these appeals is whether insurance policy taken by commercial units could be held to be hiring of services for commercial purpose and thereby excluded from the purview of the Consumer Protection Act, 1986.
The Gujarat State Consumer Disputes Redressal Commission arrived at the conclusion that Complainants have availed of the service of the Insurance Company for commercial purpose and, therefore, dismissed the complaints on the preliminary ground, as not maintainable. Hence, these appeals.
Relevant definitions of the words consumer and service:
For deciding this, we would first refer to very wide definitions of words consumer and service under Sections 2(1)(d) and 2(1)(o) which are as under:
Section 2(1)(d):
consumer means any person who,
(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 services 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 purpose.).
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.
Section 2(1)(o) service means service of any description which is made available to potential users and includes the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying a news or other information (but does not include the rendering of any service free of charge or under a contract of personal service).
From the aforesaid definitions it can be held that:
(a) a person is a consumer who buys any goods for consideration and also include user of such goods;
(b) who hires any services for consideration and includes beneficiary of such services.
To this wide definition there are exclusions:
(i). It excludes a consumer who obtains such goods for resale or for any commercial purpose;
(ii). It also excludes a person who avails of services of any description
(i) free of charge; or
(ii) under a contract of personal service; and
(iii) for any commercial purposes.
The Legislature has carved out further exception by providing that commercial purpose does not include use by a person of goods bought and used by him and services availed by him, exclusively for the purpose of earning his livelihood by means of self-employment.
Therefore, in sum and substance, what is excluded is buying of goods or availing of services for commercial purpose. However, with a specific exclusion that if such buying of goods or availing of services is for earning of his livelihood by self-employment, then he would be a consumer.
Submissions:
Learned Counsel Mr. Sharma, appearing on behalf of the Appellants drew further distinction in the use of phraseology in exclusion clause by contending that Legislature has provided exclusion with regard to availing of the services and not for hiring of the services. He pointed out that meaning of the words avail and hire is different. For this purpose, he referred to the meaning giving to these words which are as under:
AVAIL (Fr.Valoir, La.Valere, to be worth), profit of land (see Earl Jowitts the Dictionary) avail oneself of is stated to mean to take advantage of utilise. The meaning given in Oxford Dictionary is also to the same effect.
In Websters Dictionary makes, avail synonymous with benefit, profit, use and have availed himself of something only if he had taken advantage or profited by that thing or utilised it to his benefit.
HIRE In Collins English Dictionary, hire has been defined as to acquire the temporary use of a thing or the services of a person in exchange for payment or to provide something or the services of oneself or others for an agreed payment usually for an agreed period.
In support of his submission, learned Counsel Shri Sharma, referred to the judicial dictionary meaning of the words commercial purpose which is as under:
The word commercial according to the Oxford Dictionary means viewed as a matter of profit and loss. The word purpose means object which is in view or for which is made : aim amend. The word commercial purposes would, therefore, cover an undertaking the object of which is to make a profit out of the undertakings. (Municipal board, Unnao Vs. The State of U.P. 1957 All. L.J. 469 at 498).
According to Oxford dictionary, it means viewed as a matter of profit or loss.
The word commercial is defined in the Concise Oxford Dictionary, New Edition of the 1990, at page 227, the word commercial is defined as having profit as a primary aim rather than artistic etc. value. (vide Dena Bank, Ahmednagar Vs. Prakash Birbhan Katariya, AIR 1994 Bom 343 at 345).
He submitted that the contract of insurance is contract of indemnity and therefore, there is no question of commerce in obtaining insurance coverage. For this purpose, he has referred to discussion on Contract of Indemnity in New Insurance Law, by Brij Nandan Singh, which is as under:
Para 19 :
Contract of indemnity: The very foundation in my opinion of every rule which has been applied to the insurance law is that the contract of insurance contained in a fire or marine policy is a contract of indemnity and of indemnity only and that this means that the assured in the case of loss against which the policy has been made, shall be fully indemnified but never more than fully indemnified. That is the fundamental principle of insurance, and if ever a proposition is brought forward which is at variance with it, that is to say which either will prevent the assured from obtaining a full indemnity, that proposition must certainly be wrong.(Castellain Vs. Preston (1883) 11 QBD 380).
Under such contracts the insurers undertake to indemnify the insured for the actual loss suffered by him as a result of the event insured against. The principle that a contract of assurance (except life assurance and insurance against accident) is a contract of indemnity, leads the insured to be interested in the preservation of the thing insured and the desire for the happening of the event insured against becomes remote. (Mathey Vs.Curling (1922) 2 AC 180).
On the basis of the aforesaid purpose of the insurance policy, he contends that availing of the insurance policy is for indemnifying the loss which may be suffered by the assured; it is for protection and not for making any profit. Therefore, it would be totally unjustified to arrive at a conclusion that as the Complainants are carrying on business/trading activity and as they have taken the insurance policy, they are not entitled to approach the consumer fora or that they are excluded as per Section 2(1)(d) of the Act.
Findings:
At the outset, it is to be stated that an insured who takes the insurance policy cannot trade or carry on any commercial activity with regard to the insurance policy taken by him. Under Sec.3 of the Insurance Act, 1938, no person is permitted to carry on business of insurance unless he obtains a certificate of registration from the Insurance Recovery and Development Authority.
Further, hiring of services of the Insurance Company by taking insurance policy by Complainants who are carrying on commercial activities cannot be held to be a commercial purpose. The policy is taken for reimbursement or for indemnity for the loss which may be suffered due to various perils. There is no question of trading or carrying on commerce in insurance policies by the insured. May be that insurance coverage is taken for commercial activity carried out by the insured.
In Halaburys Laws of England, vol. 25, 4th Edition, the origin and common principles of insurance is discussed and in paragraph 3 it has been mentioned that it is based on principle of indemnity. Thereafter, relevant discussion is to the effect that most of contract of insurance belong to general category of contracts of indemnity. In the sense that insurers liability is limited to the actual loss which is, in fact, proved. The contract is one of indemnity and, therefore, insured can recover the actual amount of loss and no more.
In this view of the matter, taking of the insurance policy is for protection of the interest of the assured in the articles or goods and not for making any profit or trading for carrying on commercial purpose.
Further, what is commercial purpose is discussed by the Apex Court in various decisions.
We would refer to few relevant judgments:
In Regional Provident Fund Commissioner Vs. Shiv Kumar Joshi, (2000) 1 SCC 98, the Court elaborately considered the provisions of Sections 2(1)(d) and 2(1)(o) as well as earlier decisions and held that The combined reading of the definitions of consumer and service under the Act and looking at the aims and object for which the Act was enacted, it is imperative that the words consumer and service as defined under the Act should be construed to comprehend consumer and services of commercial and trade-oriented nature only. Thus any person who is found to have hired services for consideration shall be deemed to be a consumer notwithstanding that the services were in connection with any goods or their user. Such services may be for any connected commercial activity and may also relate to the services as indicated in Section 2(1)(o) of the Act.
The aforesaid ratio makes it abundantly clear that services may be for any connected commercial activity, yet it would be within the purview of the Act.
In Laxmi Engineering Works Vs. PSG Industrial Institute (1995) 3 SCC 583 the Apex Court considered the dictionary meaning of the word commerce and explained what is meant by commercial purpose by giving illustrations. Relevant paragraph is as under:
The National Commission appears to have been taking a consistent view that where a person purchases goods with a view to using such goods for carrying on any activity on a large scale for the purpose of earning profit he will not be a consumer within the meaning of Section 2(d)(i) of the Act. Broadly affirming the said view and more particularly with a view to obviate any confusion the expression large scale is not a very precise expression Parliament stepped in and added the explanation to Section 2(d)(i) by Ordinance/Amendment Act, 1993. The explanation excludes certain purposes from the purview of the expression commercial purpose a case of exception to an exception. Let us elaborate: a person who buys a typewriter or a car and uses them for his personal use is certainly a consumer but a person who buys a typewriter or a car for typing others work for consideration or for plying the car as a taxi can be said to be using the typewriter/car for a commercial purpose. The explanation however clarifies that in certain situations, purchase of goods for commercial purpose would not yet take the purchaser out of the definition of expression consumer. If the commercial use is by the purchaser himself for the purpose of earning his livelihood by means of self-employment, such purchaser of goods is yet a consumer. In the illustration given above, if the purchaser himself works on typewriter or plies the car as a taxi himself, he does not cease to be a consumer. In other words, if the buyer of goods uses them himself, i.e., by self-employment, for earning his livelihood, it would not be treated as a commercial purpose and he does not cease to be a consumer for the purposes of the Act. The explanation reduces the question, what is a commercial purpose, to a question of fact to be decided in the facts of each case. It is not the value of the goods that matters but the purpose to which the goods bought are put to. The several words employed in the explanation, viz., uses them by himself, exclusively for the purpose of earning his livelihood and by means of self-employment make the intention of Parliament abundantly clear, that the goods bought must be used by the buyer himself, by employing himself for earning his livelihood. A few more illustrations would serve to emphasise what we say. A person who purchases an auto-rickshaw to ply it himself on hire for earning his livelihood would be a consumer. Similarly, a purchaser of a truck who purchases it for plying it as a public carrier by himself would be a consumer. A person who purchases a lathe machine or other machine to operate it himself for earning his livelihood would be a consumer. (In the above illustrations, if such buyer takes the assistance of one or two persons to assist/help him in operating the vehicle or machinery, he does not cease to be a consumer.) As against this a person who purchases an auto-rickshaw, a car or a lathe machine or other machine to be plied or operated exclusively by another person would not be a consumer.
In that case, the Court referred to with approval, the earlier decision of this Commission wherein Balakrishna Eradi, J. as he then was, dealt with the meaning of the words for any commercial purpose in the following words:
Since cases of resale have been separately referred to, it becomes obvious that the words for any commercial purpose are intended to cover cases other than those of resale of the concerned goods. The words for any commercial purpose are wide enough to take in all cases where goods are purchased for being used in any activity directly intended to generate profit. According to the meaning given in standard dictionaries, the expression commercial means connected with, or engaged in commerce; mercantile; having profit as the main aim (see Collins English Dictionary).
Pertaining to commerce: mercantile (see Chambers Twentieth Century Dictionary).
In New Delhi Municipal Council Vs. Sohan Lal Sachdev (Dead) represented by Mrs. Hirinder Sachdev, w/o late Sohan Lal Sachdev, (2000)2 SCC 494, the Apex Court considered the meaning of the words commerce and commercial purpose in the context of a question where use of premise for the purpose of guest house can be termed as domestic use, for the purpose of electricity charges by the New Delhi Municipal Council (NDMC). The relevant discussion is as under:
12. The two terms domestic and commercial are not defined in the Act or the Rules. Therefore, the expressions are to be given the common parlance meaning and must be understood in their natural, ordinary and popular sense. In interpreting the phrases the context in which they are used is also to be kept in mind. In Strouds Judicial Dictionary (5th Edn.) the term commercial is defined as traffic, trade or merchandise in buying and selling of goods. In the said dictionary the phrase domestic purpose is stated to mean use for personal residential purposes. In essence the question is, what the character of the purpose of user of the premises by the owner or landlord is and not the character of the place of user. For example, running a boarding house is a business, but persons in a boarding house may use water for domestic purposes. As noted earlier the classification made for the purpose of charging electricity duty by NDMC sets out the categories domestic user as contradistinguished from commercial user or to put it differently non-domestic user. The intent and purpose of the classification, as we see it, is to make a distinction between purely private residential purpose as against commercial purpose. In the case of a guest house, the building is used for providing accommodation to guests who may be travellers, passengers, or such persons who may use the premises temporarily for the purpose of their stay on payment of the charges.
The use for which the building is put by the keeper of the guest house, in the context cannot be said to be for purely residential purpose. Then the question is, can the use of the premises be said to be for commercial purpose? Keeping in mind the context in which the phrases are used and the purpose for which the classification is made, it is our considered view that the question must be answered in the affirmative. It is the user of the premises by the owner (not necessarily absolute owner) which is relevant for determination of the question and not the purpose for which the guest or occupant of the guest house uses electric energy.
Applying the aforesaid test we have to find out two things:
(i) whether goods are purchased for resale or for any commercial purpose? Or
(ii) whether the services are availed for any commercial purpose?
Therefore, the two fold classification is commercial purpose and non-commercial purpose.
If the goods are purchased for resale or for commercial purpose then such consumer would be excluded from the coverage of Consumer Protection Act, 1986. Such illustration could be that a manufacturer who is producing one product A' , for such production he may be required to purchase articles, which may be raw-material, then purchase of such articles would be for commercial purpose. As against this, the same manufacturer if he purchases a refrigerator, a television or an air-conditioner for his use at his residence or even in his office, it cannot be held to be for commercial purpose and for this purpose he is entitled to approach the consumer forum under the Act.
Similarly, a hospital which hires the services of a medical practitioner, it would be a commercial purpose. But, if a person avails of such services for his ailment it would be held to be not a commercial purpose.
Further, from the aforesaid discussion, it is apparent that even taking wide meaning of the words for any commercial purpose it would mean that goods purchased or services hired should be used in any activity directly intended to generate profit. Profit is the main aim of commercial purpose. But, in a case where goods purchased or services hired in an activity which is not directly intended to generate profit, it would not be commercial purpose.
In this view of the matter, a person who takes insurance policy to cover the envisaged risk does not take the policy for commercial purpose. Policy is only for indemnification and actual loss. It is not intended to generate profit.
In view of the above discussion, we allow the appeals, set aside the order of the State Commission and remit the appeals to the State Commission for being decided them on merits. There shall be no order as to costs.
..J. (M.B.SHAH) PRESIDENT ..
(RAJYALAKSHMI RAO,) MEMBER.