Lilavati Kirtilal Mehta Medical Trust vs M/S Unique Shanti Developers

Lilavati Kirtilal Mehta Medical Trust …Appellant

Versus

M/S Unique Shanti Developers & Ors. …

Respondents

JUDGMENT

MOHAN M. SHANTANAGOUDAR, J.

1. This appeal arises out of judgment of the National Consumer

Disputes Redressal Commission (‘National Commission’) dated

25.10.2016 dismissing the Appellant’s Review Application No.

76/2016 against the order dated 1.3.2016 by which the National

Commission dismissed the Appellant’s Consumer Complaint No. Signature Not Verified

117/2016.

Digitally signed by GULSHAN KUMAR ARORA Date: 2019.11.14 15:50:45 IST Reason: 1

2. The Appellant’s case is that Respondent No. 1/Opposite Party

No. 1 had developed two buildings ‘Madhuvan’ with thirty two ‘1

BHK’ flats in colony ‘Shanti Park’ in Thane, Maharashtra. Out of

these the Appellant/complainant trust took possession of 29 flats

for provision of hostel facilities to nurses employed by Lilavati

Hospital, which is run by the Appellant trust. 29 agreements to

sell were executed in respect of each flat on 25.11.1995, which

were registered on 16.3.1996, and entire consideration amount

was paid for the same. The architect issued completion certificate

in respect of the flats on 17.2.1997. The flats were used for the

purpose of hostel facilities till 2002. However, within 2-3 years of

completion of the project, because of alleged poor building

quality, the structure became dilapidated. The appellant vacated

the flats in 2002 and since 2004, the flats are lying unused.

In the meanwhile, an interim Board of Trustees was

constituted by this Court by order dated 21.5.2014 in SLP No.

3772/2014, which is a separate litigation concerning dispute over

control of the appellant trust between different groups of trustees.

The aforesaid interim Board of Trustees called for a structural

report from M/s Raje Consultants, which submitted their report in

2 September 2015 finding that the cost of repairs would be more

than the cost of reconstruction. The appellant also claims that

Respondent No. 1 obtained the occupation certificate for the flats

by playing fraud upon the local municipal corporation. Hence the

appellant filed Consumer Complaint No. 117/2016 before the

National Commission claiming Rs 7,65,95,400/- in compensation

on account of annual loss of rent from 2002 to 2015, cost of

reconstruction of building ‘Madhuvan’ and future loss of rent of

Rs 35,00,000/- per year, along with Rs 5,00,000/- in damages.

Initially, the National Commission by order dated 1.3.2016

dismissed the complaint as barred by limitation on the ground

that cause of action for raising the complaint arose in 2004, the

year since when the flats are lying unused; however the

complaint was filed in 2016. Under Section 24A of the Consumer

Protection Act, 1986 (‘1986 Act’) the period of limitation for filing

a complaint is two years, hence the complaint was time-barred.

The National Commission further held that the pending litigation

between the trustees in SLP No. 3772/2014 (supra) is not

sufficient to explain the delay as the dispute concerning

constitution of Board of Trustees of the appellant trust arose in

3 2014 whereas it was not the appellant’s case that there was no

competent Board of Trustees in 2004 when the cause of action

arose.

Subsequently the National Commission in the impugned

judgment, hearing Review Application No. 76 of 2016 against the

order dated 1.3.2016 (supra), found that it had incorrectly

recorded in the aforesaid order that ‘conveyance deeds’ of the 29

flats were registered on 16.3.1996, whereas what was registered

by the appellants was actually agreements to sell. Hence on

account of this error on the face of the record, the National

Commission recalled the order dated 1.3.2016. However the

National Commission again proceeded to dismiss the complaint,

this time on the ground that the appellant trust was not a

‘consumer’ within the meaning of Section 2(1)(d) of the 1986 Act

as the aforesaid section excludes a person who obtains goods and

services for a ‘commercial purpose’; that since providing hostel

facility to the nurses is directly connected to the commercial

purpose of running the hospital, and is consideration for the work

done by them in the hospital, the appellant would not be a

‘consumer’ under the 1986 Act. Hence this appeal.

4

3. Section 2(1)(d) of the 1986 Act defines ‘consumer’ as

follows:

“(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 prom-

ised, 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.

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)

The above Explanation clause was added to Section 2(1)(d)

by way of Ordinance No. 24 of 1993 (subsequently replaced by

Amendment Act No. 50 of 1993), with effect from 18.6.1993.

5 Amendment Act No. 50 of 1993 also added ‘housing construction’

to the definition of ‘service’ under Section 2(o) of the 1986 Act.

In the present case, it is not denied that the Appellant has

validly taken possession of the flats constructed by Respondent

No. 1 and paid consideration for the same, and can therefore be

said to have availed of its housing construction services. This

Court has held in Spring Meadows Hospital v. Harjol

Ahluwalia through K.S. Ahluwalia , I (1998) CPJ 1 (SC), that the

person who hires the service for a beneficiary can also be

included in the definition of ‘consumer’ under Section 2(1)(d)(ii).

Though that case was in the context of parents hiring the services

of a hospital for their minor child, the same principle may also be

extended to a case such as the present one where an employer

such as the Appellant trust hires certain services for the welfare

of its employees. Hence, though possession of the flats was

acquired for the purpose of providing housing facility to the

hospital nurses, the Appellant is entitled to claim against

Respondent No. 1 as a consumer.

The only issue which arises for our consideration therefore is

whether the purchase of flats for the purpose of providing

6 accommodation to nurses employed by the Appellant trust’s

hospital qualifies as a ‘purchase of services for a commercial

purpose’; and consequently whether the Appellant is excluded

from the definition of ‘consumer’ under Section 2(1)(d) of the

1986 Act?

Learned senior counsel for the Appellant, Mr. Guru Krishna

Kumar argued in reliance upon this Court’s decisions in Laxmi

Engineering Works v. P.S.G. Industrial Institute, (1995) 3

SCC 583, and Paramount Digital Colour Lab v. Agfa India

Private Limited, (2018) 14 SCC 81, that the Court has to look at

the dominant purpose for which the purchase is made in order to

decide whether it was for a ‘commercial purpose.’ In this case,

the dominant purpose for purchasing the flats was to provide

housing to the nurses and was not linked to the commercial

operations of the hospital.

Per contra, learned senior counsel for the Respondents Ms.

Kiran Suri argued that under the Explanation to Section 2(1)(d),

only goods and services availed “exclusively for the purpose of

earning livelihood by self-employment” are excluded from the

ambit of ‘commercial purpose’. In the present case, the hostel

7 facilities in the flats constructed by Respondent No. 1 were for the

purpose of providing comfortable accommodation to the nurses,

which in turn would increase their efficiency and lead to provision

of better services to the hospital. Hence the flats were indirectly

connected to the commercial purpose of increasing profits for the

hospital. Such a purchase would not fall in the category of

‘earning livelihood by self-employment’. Learned senior counsel

relied on this Court’s decisions in Laxmi Engineering (supra),

Cheema Engineering Services v. Rajan Singh, (1997) 1 SCC

131, and Kalpavruksha Charitable Trust v. Toshniwal

Brothers (Bombay) Pvt. Ltd., (2000) 1 SCC 512, to buttress

her argument.

4. Taking into account the material on record and the relevant

jurisprudence on this issue, we are of the considered opinion that

the purchase of flats by the Appellant for the purpose of providing

hostel facilities to the hospital nurses does not qualify as meant

for a ‘commercial purpose’. Though the term ‘commercial

purpose’ as referred to under Section 2(1)(d) has nowhere been

defined under the provisions of the 1986 Act, this Court has

8 expounded upon it based on its lateral dictionary meaning in

various decisions.

In Laxmi Engineering (supra), which is one of the leading

authorities on this point, a two-Judge Bench of this Court

elucidated upon the meaning of ‘commercial purpose’ as follows:

“10. A review of the provisions of the Act discloses that the quasi-judicial bodies/authorities/agencies created by the Act known as District Forums, State Commissions and the National Commission are not courts though invested with some of the powers of a civil court. They are quasi-judicial tribunals brought into existence to render inexpensive and speedy remedies to consumers…The idea was to help the consumers get justice and fair treatment in the matter of goods and services purchased and availed by them in a market dominated by large trading and manufacturing bodies. Indeed, the entire Act revolves round the consumer and is designed to protect his interest. The Act provides for "business-to-consumer' disputes and not for "business- to-business" disputes. This scheme of the Act, in our opinion, is relevant to and helps in interpreting the words that fall for consideration in this appeal.

11. Controversy has, however, arisen with respect to meaning of the expression “commercial purpose”. It is also not defined in the Act. In the absence of a definition, we have to go by its ordinary meaning.

“Commercial” denotes “pertaining to commerce” (Chamber's Twentieth Century Dictionary); it means “connected with, or engaged in commerce; mercantile; having profit as the main aim” (Collins English Dictionary) whereas the word “commerce" means "financial transactions especially buying and selling of merchandise, on a large scale" (Concise Oxford

9 Dictionary). 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…

…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.” (emphasis supplied) In the aforementioned discussion in Laxmi Engineering, this

Court relied upon Synco Textiles Pvt. Ltd. v. Greaves Cotton

and Company Limited, (1991) 1 CPJ 499. In Synco Textiles, a

4 Member-Bench of the National Commission headed by V.

Balakrishna Eradi J., expounded upon the meaning of the term

‘commercial purpose’, prior to the insertion of the Explanation

clause to Section 2(1)(d) of the 1986 Act:

“3…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…

10

4. Going by the plain dictionary meaning of the words used in the definition section the intention of Parliament must be understood to be to exclude from the scope of the expression 'consumer' any person who buys goods for the purpose of their being used in any activity engaged on a large scale for the purpose of making profit. It is obvious that Parliament intended to restrict the benefits of the Act to ordinary consumers purchasing goods either for their own consumption or even for use in some small venture which they may have embarked upon in order to make a living as distinct from large scale manufacturing or processing activity carried on for profit. In order that exclusion clause should apply it is however necessary that there should be a close nexus between the transaction of purchase of goods and the large scale activity carried on for earning profit.

6. There is a close and direct nexus between the purpose of purchase of the generating sets and the commercial activity of manufacturing of edible oils for trade carried on by the appellant company, since the generating sets were intended to be used, as and when the need arose, for generating electric current for manufacture of edible oils for the purpose of trade. We do not, therefore, find any reason to interfere with the view taken by the State Commission that the appellant is not a ‘consumer’.”

Recently, a two-Judge bench of this Court, comprising of one of

us, in Paramount Digital Colour Lab (supra) has re-

emphasized the importance of there being a ‘close nexus’

between the purpose for which the good or service is availed of

11 and a large-scale profit activity in order to classify such a

transaction as commercial in nature, as illustrated below:

“12…It is therefore clear, that despite “commercial activity”, whether a person would fall within the definition of “consumer” or not would be a question of fact in every case. Such question of fact ought to be decided in the facts and circumstances of each case.

17. Since there is nothing on record to show that they wanted the machine to be installed for a commercial purpose and not exclusively for the purposes of earning their livelihood by means of self-employment, the National Commission was not justified in concluding that the appellants have utilised the services of an operator or a helper to run a commercial venture. One machine does not need many operators or helpers to complete the work entrusted. Since the appellants were two partners, they must have been doing the work on their own, of course, may be with the aid of a helper or an operator. The machine would not have been used in a large-scale profit-making activity but, on the contrary, the appellants purchased the machine for their own utility, personal handling and for their small venture which they had embarked upon to make a livelihood.

The same is distinct from large-scale manufacturing or processing activity carried on for huge profits. There is no close nexus between the transaction of purchase of the machine and the alleged large-scale activity carried on for earning profit. Since the appellants had got no employment and they were unemployed graduates, that too without finances, it is but natural for them to raise a loan to start the business of photography on a small scale for earning their livelihood.”

Therefore this Court in Paramount Digital Colour Lab

(supra) held that the purchase of a machine for appellants’

12 photography business, which was a small-scale business meant

for earning their livelihood, would not be interpreted as being for

a ‘commercial purpose.’

5. It is true that the aforementioned decisions were rendered in

the context of deciding whether the goods or services availed of

in the facts of those cases were for a commercial purpose or

exclusively for the purpose of self-employment. This does not

mean, however, that in every case a negative test has to be

adopted wherein any activity that does not fall within the ambit of

‘earning livelihood by means of self-employment’ would

necessarily be for a commercial purpose. We reject Respondent

No. 1’s argument in this regard. The Explanation clause to Section

2(1)(d) of the 1986 Act is only clarificatory in nature, as was

highlighted by this Court in Laxmi Engineering (supra):

“14. Yet another clarification; the Explanation, in our opinion is only explanatory; it is more in the nature of a clarification a fact which would become evident if one examines the definition (minus the explanation) in the context and scheme of the enactment. As indicated earlier, the explanation broadly affirms the decisions of the National Commission. It merely makes explicit what was implicit in the Act. It is not as if the law is changed by the said explanation; it has been merely made clearer.”

13 Therefore the Explanation clause only re-affirms the

definition of ‘consumer’ as it already exists. Ultimately, whether

or not a person is a consumer or whether an activity is meant for

a commercial purpose will depend upon the facts and

circumstances of each case. It may be the case that a person who

engages in commercial activities has purchased a good or availed

of a service for their personal use and consumption, or for the

personal use of a beneficiary, and such purchase is not linked to

their ordinary profit-generating activities or for creation of self-

employment. Such a person may still claim to be a ‘consumer.’

For example, a large corporation may hire the services of a

caterer or a 5-star hotel for hosting a function for its employees

and their families. If there is any deficiency in service, the service-

provider cannot claim that merely because the person availing of

the service is a profit-generating entity, and because such

transaction does not relate to generation of livelihood through

self-employment, they do not fall under the definition of a

‘consumer.’ A commercial entity may also be a consumer

depending upon the facts of the case. It is not the identity of the

14 person but the purpose for which the transaction is made which is

relevant.

6. With regard to goods and services availed of by employers

for the benefit of their employees, it is particularly important to

note that we live in a socialist economy, wherein the ethos

dictates that employers are obligated to make provisions for the

welfare of their employees. No doubt, welfare measures

undertaken by employers may increase workers’ health and

efficiency, and therefore improve the employing entity’s overall

productivity. However this is a duty to be shared by all employer

organisations and not merely those looking to increase their

productivity/profits. This obligation exists irrespective of how

much profit or turnover the organization generates in a year,

though the degree to which it extends may differ depending upon

the financial capacity of the employer.

Hence private corporate bodies such as the Appellant trust

may engage the services of third parties for the purpose of

providing perquisites to their employees. For example, an

employer may book flight tickets or train tickets for an employee

so as to facilitate their travel in the ordinary course of business. If

15 any negligence occurs resulting in injury to the employee or their

property, the airline/railway company cannot disclaim liability on

the ground that the activity was carried out for a ‘commercial

purpose’.

As discussed earlier, if in all such cases the third party

service-provider disclaims liability before consumer forums on the

ground that the hirer of the service is engaged in trade and

commerce, it will open a Pandora’s box wherein the employer as

well as the employees will not have any remedy. This would

defeat the object of providing a speedy remedy to consumers, as

outlined in the provisions of the 1986 Act. Further, setting such a

precedent may discourage employers from undertaking to

provide any facilities for their employees. Hence, it is necessary

to clarify that the provision of such services would not usually be

included in the definition of ‘commercial purpose.’

7. To summarize from the above discussion, though a straight-

jacket formula cannot be adopted in every case, the following

broad principles can be culled out for determining whether an

activity or transaction is ‘for a commercial purpose’:

16

(i) The question of whether a transaction is for a commercial

purpose would depend upon the facts and circumstances of each

case. However, ordinarily, ‘commercial purpose’ is understood to

include manufacturing/industrial activity or business-to-business

transactions between commercial entities.

(ii) The purchase of the good or service should have a close and

direct nexus with a profit-generating activity.

(iii) The identity of the person making the purchase or the value

of the transaction is not conclusive to the question of whether it is

for a commercial purpose. 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.

(iv) If it is found that the dominant purpose behind purchasing the

good or service was for the personal use and consumption of the

purchaser and/or their beneficiary, or is 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.

17

8. Applying these principles to the facts of the present case, we

find that there is no direct nexus between the purchase of flats by

the Appellant trust and its profit generating activities. The flats

were not occupied for undertaking any medical/diagnostic

facilities within the hospital but for accommodating the nurses

employed by the hospital. Moreover, the flats were being

provided to the nurses without any rent. It is not the

Respondents’ case that the Appellant was generating any surplus

from occupying the flats or engaging in buying and selling of flats.

It may be the case that provision of comfortable hostel

facilities to the nurses, generates a feeling of gratitude and

loyalty towards their employer and improves their overall

efficiency, which indirectly results in the hospital gaining more

repute and therefore generating more income. However, this is a

matter of conjecture and there is no direct causal chain which can

be drawn between provision of accommodation to hospital

employees and increase in the Appellant’s profits.

The decision in Kalpavruksha Charitable Trust (supra),

relied upon by the Respondents, does not support them inasmuch

as it was on a different set of facts. In that case, this Court held

18 that the purchase of CT scan machines by a diagnostic centre

would be included within the meaning of ‘commercial purpose’.

There is an apparent direct nexus between the purchase of the

machines, medical equipment, etc. and the running of a

diagnostic centre/hospital. The present case does not involve any

such purchase.

Further, applying the dominant purpose test, it cannot be

said that the provision of such hostel facilities is integral to the

Appellant trust’s commercial activities. The paramount object of

providing such facilities is to cater to the needs of nurses and

combat the challenges faced by those who lack permanent

accommodation in the city, so as to recompense the nurses for

the pivotal role which they play as co-ordinators and custodians of

patients’ care.

Nurses help in the speedy recovery of patients and are a

vital resource for hospitals and medical centres inasmuch as they

are the only resource available 24/7 for catering to patients’

needs. They are directly involved in all aspects of hospital service

quality, be it in the form of monitoring patients’ recovery, bedside

medication management or assistance with surgeries and other

19 major operations. In some situations they are responsible for

performing immediate interventions to prevent medical

complications. They are on the frontlines of administering and

evaluating treatment, and provide invaluable emotional support

as they are best placed to understand the complexities and

implications of having a serious illness.

Hence the provision of hostel facilities to nurses so as to

facilitate better medical care is a positive duty enjoined upon the

hospital so as to maintain the beneficial effects of the curative

care efforts undertaken by it. Such a duty exists irrespective of

the surplus or turnover generated by the hospital, and hence is

not even remotely related to the object of earning profits or for

any commercial use as envisaged under Section 2(1)(d).

9. Hence we find that the Appellant trust is a ‘consumer’ under

Section 2(1)(d) of the 1986 Act for the present transaction under

consideration. In light of the above discussion, we consider it

appropriate to remand the matter to the National Commission for

consideration in accordance with law. The appeal is allowed and

restored before the National Commission, and the impugned

judgment is set aside, in the aforesaid terms. The parties are

20 relegated to record their evidence before the National

Commission, and the National Commission is requested to hear

the matter on merits and decide the same expeditiously, at an

early date.

...........................................J. (Mohan M. Shantanagoudar)

...........................................J. (Ajay Rastogi)

New Delhi;

November 14, 2019.

21