National Insurance Co. Ltd. vs Harsolia Motors

NATIONAL INSURANCE CO. LTD. ….APPELLANT(S)

VERSUS

HARSOLIA MOTORS AND OTHERS ….RESPONDENT(S)

WITH

CIVIL APPEAL NO(S).5354 OF 2007

CIVIL APPEAL NO(S).2821 OF 2012

CIVIL APPEAL NO(S).3350 OF 2018

CIVIL APPEAL NO(S). OF 2023 (@ SPECIAL LEAVE PETITION (CIVIL) NO(S).1039 OF 2020)

JUDGMENT

Rastogi, J.

Signature Not Verified Digitally signed by Jayant Kumar Arora Date: 2023.04.13 16:54:34 IST

CIVIL APPEAL NO(S).5352­5353 OF 2007 Reason:

1

1. The assail in the present appeals by special leave is to

judgment and order passed by the National Consumer Disputes

Redressal Commission (hereinafter “National Commission”) dated

3rd December, 2004, whereby the National Commission, while

reversing the finding of the Gujarat State Consumer Disputes

Redressal Commission (hereinafter “State Commission”), regarding

maintainability of the complaint filed at the instance of the

respondent under the Consumer Protection Act, 1986 (hereinafter

“Act, 1986”) held that a person who takes insurance policy to cover

the envisaged risk does not take the policy for the commercial

purpose. Policy is only for indemnification of an actual loss and is

not intended to generate profits and finally held that the respondent

(insured) was a consumer as defined under Section 2(1)(d) of the

Act, 1986 and the complaint filed at his instance was maintainable

and be examined by the State Commission on merits.

2. Respondent no.1 (dealer in TATA vehicles) and respondent

no.2 are the claimants. Respondent no.1 took out a fire insurance

policy with the appellant for a cover of Rs.75,38,000/­ and

respondent no.2 for a cover of Rs.90 lakhs. That on 28 th February,

2 2002, damage was caused to the goods of respondent nos.1 and 2

due to fire (during the course of Godhra riots). The appellant

denied the claim of respondent no.1, while admitting the claim of

respondent no.2 to the extent of Rs.54,29,871/­. The respondents

filed complaint before the State Commission.

3. Respondent no.1 M/s Harsolia Motors, a commercial entity

engaged in the business of sale of vehicles, took fire insurance

policy from the appellant insurance company covering the office,

showroom, garage, machinery lying in the showroom premises, etc.

The grievance of the respondent was that their aforesaid premises

were damaged during the Godhra riots on 28 th February, 2002. A

complaint was instituted by the respondent, M/s Harsolia Motors, a

partnership firm, before the State Commission, for compensation of

damage caused on the ground that post­Godhra incident, which

took place on 27th February, 2002, riots broke out resulting into

complainant’s goods being destroyed by fire set up by rioters on 28 th

February, 2002 and the respondent/complainant was entitled to be

indemnified the insured sum under the policy of insurance.

3

4. The State Commission held that the respondent is not covered

under the expression “consumer” as defined under Section 2(1)(d) of

the Act, 1986 and held that the complainant being a company

running a business from the premises to earn profits falls under the

term “for commercial purpose” and the complaint is not

maintainable under the provisions of the Act, 1986.

5. On an appeal being preferred by the respondent insured before

the National Commission, the question arose as to whether the

insurance policies taken by a commercial unit could be held to be

hiring of services for commercial purpose and are hereby excluded

from the provisions of the Act, 1986 after revisiting the provisions of

the Act, 1986 and the definition of the terms “consumer” and

“service” as defined under Section 2(1)(d) and 2(1)(o) of the Act,

1986, respectively the Commission recorded a finding that the

expression used “for any commercial purpose” would mean that the

goods purchased or services hired should be used in any activity

directly intended to generate profit and profit is the main aim of

commercial purpose, but in a case where goods purchased or

services hired in an activity which is not intended to generate profit,

4 it would not be a commercial purpose and held that a person who

takes the policy of insurance to cover the envisaged risk, for

indemnification of actual loss suffered is not ordinarily intended to

generate profits and accordingly held that the

respondent/complainant was a “consumer” under Section 2(1)(d) of

the Act, 1986 and complaint filed at its instance is to be

examined/decided by the State Commission on its own merits

under the judgment impugned dated 3rd December, 2004, is a

subject matter of challenge in appeal before this Court at the

instance of the appellant insurance company.

6. While the notices were issued by this Court on 15 th April,

2005, the operation and effect of the judgment impugned was

stayed. In consequence thereof, the complaint filed at the instance

of the respondent has not been examined by the State Commission

on merits so far.

7. The other batch of appeals which were heard along with Civil

Appeal No(s).5352­5353 of 2007 (National Insurance Co. Ltd. v.

Harsolia Motors and Others) arising from the judgment of the

National Commission, placing reliance on the impugned judgment

5 dated 3rd December, 2004, applying the self­same principles are

also challenged at the instance of the appellant insurer before us.

8. The seminal issue that emanates for our consideration is

whether the insurance policy taken by the respondent (commercial

enterprises) insured amounts to hiring of services for “commercial

purpose” thereby excluded from the purview of the expression

“consumer” as defined under Section 2(1)(d) of the Act, 1986.

9. Learned counsel for the appellant submits that there cannot

be a blanket inclusion of all insurance matters within the purview

of Act, 1986 and if that is being taken at the face value, it would

render the provisions of the Commercial Courts Act, 2015

(hereinafter “Act, 2015”) nugatory and submits that Section 2(1)(XX)

of the Act,2015 includes insurance and re­insurance within the

ambit of commercial disputes.

10. Learned counsel further submits that law on the subject has

been examined by this Court in Laxmi Engineering Works v.

P.S.G. Industrial Institute1 and it was held that “commercial

purpose” is to be looked into, in the facts and circumstances of 1 (1995) 3 SCC 583

6 each case to consider the purpose for which the goods and services

are bought or availed. If it is availed with a view to carrying out

large scale commercial activity with profit motive, then the buyer

would not qualify as a consumer and the Act, 1986 would not be

applicable and the view of this Court has been consistently affirmed

in the later judgments.

11. Learned counsel further submits that the Commission in its

second last para explicitly takes the very policy of insurance within

the purview of the Act, 1986 and in sequel thereof, regardless of the

nature of transaction, whenever there is a claim for compensation

in reference to the policy of insurance, such complaints became

maintainable under the Act, 1986.

12. Learned counsel further submits that dominant purpose of

obtaining insurance contracts by the business entities is to earn

profits and thus has a close and direct nexus with it and

accordingly these entities are not entitled to file the claim before the

Consumer Court seeking summary proceedings and the present

disputes are not of a small disgruntled consumer who is seeking

claim of an insurance for loss of mobile for personal use, or of

7 autorickshaw driver seeking claim for expenses incurred for fixing a

defective engine as that is covered for his livelihood. The instant

dispute pertains to large scale business entities entering into

commercial agreements with the insurance companies to protect

the risks associated in carrying out their businesses. If they are

being permitted to invoke the jurisdiction as a consumer under the

Act, 1986, it will frustrate the very mandate of the legislative

wisdom, pursuant to which this Act has been enacted.

13. Learned counsel further submits that the doctrine of election

is not available to the litigant who is aggrieved by the insurance

contract as Section 2(1)(d) of the Act, 1986 and Section 2(7) of the

Consumer Protection Act, 2019 Act specifically exclude the

provisions of services “for commercial purpose” from the ambit of

consumer courts and the only remedy lies to the commercial courts

under the Act, 2015.

14. Learned counsel submits that if contention to the contrary of

insurance for commercial activities falling within the ambit of the

Act, 1986 is to be accepted, then obtaining any service for any

commercial activity even for facilitating profit generation for

8 commercial enterprise would fall within the expression “consumer”

as defined under Section 2(1)(d) of the Act, 1986 and it would lead

to improbability as it would go against the basic tenets of service

being used for commercial ends whose violation give rise to civil

action and not consumer redressal.

15. Learned counsel further submits that if the respondent’s

submission of insurance as a service availed by any person within

the meaning of the Act is accepted, this would entail an exponential

growth of consumer disputes across the country, not only would

that lead to frustration of literal spirit and intent of the socially and

economically beneficial legislation, rather it would inadvertently give

rise to the premiums charged by the insurance company which

would again subserve the overall intent of the Act, as actual

consumers who regularly avail the services will have to pay more for

the same coverage and this can be taken note from the Statement of

Objects and Reasons which was kept in mind for the purpose of

making the amendment in the year 2002.

16. Learned counsel lastly submits that the purchase of insurance

policy has a direct nexus with the commercial activity in a large­

9 scale enterprise. In other words, the insurance policy indemnifies

the company against loss arising out of fire, earthquake or any

other insured peril. What is reimbursed by the insurance company

is a loss and loss is directly interlinked with the commerce of the

company and, therefore, a complaint seeking reimbursement of a

loss would not be maintainable before the Consumer Court if it is

filed by a large­scale commercial entity like the respondent herein

and the interpretation addressed by the National Commission of the

provisions of the Act, 1986 not only runs contrary to the judgments

of this Court, it is otherwise not legally sustainable and deserves to

be interfered by this Court.

17. Per contra, learned counsel for the respondent, submits that

the purchase of insurance policy cover is a contract of

indemnification of particular risk and not a contract of doing or not

doing something to earn profit/loss out of such act. If the

contemplated risk out of particular eventuality i.e., fire, flood, etc.,

does not occur, then there is no question of encashment of policy

cover, and if this happens what is payable is the risk amount

against premium paid in advance. Under the circumstances, the

10 insurance policy cover is being offered/purchased not basically to

earn profit, but to cover the uninvited risk, hence, buying of policy

cover is not for commercial purpose even if it is purchased by

commercial enterprises and what is commercial purpose is well

defined not only in several dictionaries but also in the judgments of

this Court and submitted that it may be noticed that the Act, 1986

bars only a transaction for “commercial purpose” but it does not bar

any commercial enterprise to be a consumer and hence the

commercial enterprise can be a buyer/consumer and can enforce

its rights as a consumer, provided immediate intent is to generate

profit out of such transaction by the commercial enterprise, as held

by this Court in Madan Kumar Singh (Dead) Through LR. v.

District Magistrate, Sultanpur and Others2.

18. Learned counsel further submits that any transaction by

commercial enterprises even without immediate intention to make

profit cannot be regarded for “commercial purpose”, otherwise all

transactions by commercial enterprises may or may not have even

remote co­relation of generating profit will be treated for commercial

2 (2009) 9 SCC 79

11 purposes. Say, for example, a company buying a water plant for its

workers or for any stranger/outsider to serve free water ­ or paint

tins in bulk for upgrading walls etc. have no direct effect of earning

profit out of it. Thus, buying a water plant cannot be treated for

commercial purpose, otherwise virtually all transactions by

commercial enterprise will get colour of commercial purpose and

had it been such an intention of the legislature, then it would have

worded the definition of term “consumer” differently – instead of

“any person” would have used “any person other than commercial

enterprises”, but the statute in its wisdom has allowed to cover

commercial transaction with commercial purpose. Therefore, the

transactions by the commercial enterprises per se cannot be

considered as an exclusion altogether under the Act, 1986.

19. We have heard learned counsel for the parties and with their

assistance perused the material available on record.

20. Before we proceed to examine the issue raised for our

consideration, it will be apposite to take a bird’s eye­view of the Act,

1986.

12

21. The Act, 1986 is a social benefit­oriented legislation and,

therefore, the Court has to adopt a constructive liberal approach

while construing the provisions of the Act. To begin with the

Preamble of the Act, 1986 which can afford useful assistance to

ascertain the legislative intention, it was enacted to provide for the

protection of the interests of consumers. Use of the word

“protection” furnishes key to the minds of makers of the Act.

Various definitions and provisions which elaborately attempt to

achieve this objective have to be construed in this light without

departing from the settled law that a Preamble cannot control

otherwise plain meaning of a provision.

22. In fact, the law meets long felt necessity of protecting the

common man from such wrong for which the remedy under

ordinary law for various reasons has become illusory. Various

legislations and regulations permitting the State to intervene and

protect interests of the consumers have become a haven for

unscrupulous ones as the enforcement machinery either does not

move or it moves ineffectively and inefficiently for reasons which are

not necessary to be stated.

13

23. The importance of the Act lies in promoting welfare of the

society by enabling the consumer to participate directly in the

market economy. A scrutiny of various definitions such as

“consumer”, “service”, “trader”, “unfair trade practice” indicates that

legislature has attempted to widen the ambit and reach of the Act.

Each of these definitions are in two parts, one explanatory and the

other inclusive. The explanatory or the main part itself uses

expressions of amplitude indicating clearly its wide sweep within its

ambit to widen such things which otherwise would have been

beyond its natural import.

24. The provisions of the Act, 1986 thus have to be construed in

favour of the consumer to achieve the purpose of enactment as it is

a social benefit­oriented legislation. The primary duty of the

Court/Commission while construing the provisions of such an Act

is to adopt a constructive approach subject to that it should not do

violence to the language of the provisions and is not contrary to

attempted objective of the enactment.

25. Section 2(1)(d) defines “consumer”, Section 2(1)(m) defines “a

person” and Section 2(1)(o) defines “service”, which are relevant to

14 examine the moot question raised for our consideration are

reproduced hereunder:

“2. Definitions. ­ In this Act, unless the context otherwise requires,­

……..

(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 payments, when such services are availed of with the approval of the first­mentioned person;

Explanation: For the purposes of sub­clause (i), "commercial purpose" does not include use by a consumer of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of self­employment;

……

(m) "person" includes­

(i) a firm whether registered or not;

(ii) a Hindu undivided family;

(iii) a co­operative society;

(iv) every other association of persons whether registered under the Societies Registration Act, 1860 (22 of 1860) or not; …….

15

(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 of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service.”

26. The word “consumer” is the fulcrum of the Act. Since the Act

hinges on the twin concepts of defect in goods or any deficiency in

service, a consumer is one who buys any goods or hires any service.

The term “consumer” has, thus, been defined to mean a person who

is –

(a) a buyer, or

(b) with the approval of the buyer, the user, of the goods in

question, or

(c) a hirer or person otherwise availing, or

(d) with the approval of such aforesaid persons, the beneficiary, of

the service or services in question

With the condition super added that such buying of the goods or

hiring or availing of any such service, is for a consideration, ­

(i) paid, or

16

(ii) promised, or

(iii) partly paid or promised, or

(iv) covered by any system of deferred payment.

27. However, the word “consumer” so defined does not include a

person, who, in case of goods obtains such goods for resale or for

any commercial purpose, or who, in case of service, avails of such

services, for any commercial purpose. An explanation appended to

the above definition states that the expression “commercial

purpose” does not include the use by the buyer of such goods or the

person availing such service or services, exclusively for the purpose

of earning his livelihood by means of self­employment.

28. It may be noticed that Section 2(1)(m) defines “person” and

includes a firm, whether registered or not, apart from other

categories without any distinction, big or small. So, as “services”

defined under Section 2(1)(o) includes banking, insurance and if

there is deficiency in service in the matter of banking/insurance,

etc., subject to the fact that he is a consumer under Section 2(1)(d),

17 remedy is always available to such a consumer to invoke the

jurisdiction of the Act, 1986.

29. This Court adverted to the concept of “consumer” as defined

under the Act, analysing the definition in the context of the Act, in

Lucknow Development Authority v. M.K. Gupta3 held :

“3……It is in two parts. The first deals with goods and the other with services. Both parts first declare the meaning of goods and services by use of wide expressions. Their ambit is further enlarged by use of inclusive clause. For instance, it is not only purchaser of goods or hirer of services but even those who use the goods or who are beneficiaries of services with approval of the person who purchased the goods or who hired services are included in it. The legislature has taken precaution not only to define ‘complaint’, ‘complainant’, ‘consumer’ but even to mention in detail what would amount to unfair trade practice by giving an elaborate definition in clause (r) and even to define ‘defect’ and ‘deficiency’ by clauses (f) and (g) for which a consumer can approach the Commission. The Act thus aims to protect the economic interest of a consumer as understood in commercial sense as a purchaser of goods and in the larger sense of user of services. The common characteristics of goods and services are that they are supplied at a price to cover the costs and generate profit or income for the seller of goods or provider of services. But the defect in one and deficiency in other may have to be removed and compensated differently. The former is, normally, capable of being replaced and repaired whereas the other may be required to be compensated by award of the just equivalent of the value or damages for loss……”

30. Later, this Court in Laxmi Engineering Works (supra), while

dealing with the connotative expanse of the term “consumer” in the

unamended form and the explanation added to the expression 3 (1994) 1 SCC 243

18 “Consumer” by an amendment, ruled that such explanation is

clarificatory in nature and taking note of the explanation added by

the amendment Act, 1993 extensively examined the definition of the

term “consumer” as under:­

“11. Now coming back to the definition of the expression ‘consumer’ in Section 2(d), a consumer means insofar as is relevant for the purpose of this appeal, (i) a person who buys any goods for consideration; it is immaterial whether the consideration is paid or promised, or partly paid and partly promised, or whether the payment of consideration is deferred; (ii) a person who uses such goods with the approval of the person who buys such goods for consideration; (iii) but does not include a person who buys such goods for resale or for any commercial purpose. The expression ‘resale’ is clear enough. 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 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. 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

19 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 self­employment, 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 self­employment, 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 auto­rickshaw 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 auto­rickshaw, a car or a lathe machine or other machine to be plied or operated exclusively by another person would not be a consumer. This is the necessary limitation flowing from the expressions “used by him”, and “by means of self­employment” in the explanation. The ambiguity in the meaning of the words “for the purpose of earning his livelihood” is explained and clarified by the other two sets of words.

and after a fair analysis of the definition “consumer”

post­amendment 1993 finally held as under:

“21. We must, therefore, hold that:

20

(i) The explanation added by the Consumer Protection (Amendment) Act 50 of 1993 (replacing Ordinance 24 of 1993) with effect from 18­6­1993 is clarificatory in nature and applies to all pending proceedings.

(ii) Whether the purpose for which a person has bought goods is a “commercial purpose” within the meaning of the definition of expression ‘consumer’ in Section 2(d) of the Act is always a question of fact to be decided in the facts and circumstances of each case.

(iii) A person who buys goods and uses them himself, exclusively for the purpose of earning his livelihood, by means of self­ employment is within the definition of the expression ‘consumer’.”

31. The exposition of law on the subject was further considered by

this Court in Lilavati Kirtilal Mehta Medical Trust v. Unique

Shanti Developers and Others4 in which one of us (Rastogi, J.)

was a member and the question arose for consideration was

whether the purchase of flats for the purpose of providing

accommodation to nurses employed by the Lilavati Kirtilal Mehta

Medical Trust hospital qualifies a purchase of services for

commercial purpose and whether the Hospital Trust was excluded

from the definition of “consumer” under Section 2(1)(d) of the Act,

1986, this Court after revisiting the scheme of the Act, 1986 and

taking note of the law of precedence in Laxmi Engineering Works

(supra) of which a reference has been made and placing reliance on

4 (2020) 2 SCC 265

21 the judgment of this Court in Paramount Digital Colour Lab and

Others v. AGFA India Private Limited and Others5 held that a

person whether or not a consumer or other activities meant for

commercial purpose will always depend upon the facts and

circumstances of each case.

32. It may be a case that a person who is engaged in commercial

activities has purchased goods or availed of service for his personal

use or consumption or for the personal use of a beneficiary and

such purchase is not linked to their ordinary profits generating

activities or for creation of self­employment, such a person may still

claim to be a consumer and after discussion of various illustrations

summarized the discussion after taking note of the broad principles

that were culled out for determination whether the activity or

transaction is for a commercial purpose, held as under:

“19. To summarise from the above discussion, though a strait 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”:

19.1. 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 business­to­business transactions between commercial entities.

5 (2018) 14 SCC 81

22 19.2. The purchase of the good or service should have a close and direct nexus with a profit­generating activity. 19.3. 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.

19.4. 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 self­employment” need not be looked into.”

33. This Court noticed that the hostel facilities were provided to

the nurses employed by Lilavati hospital but after some time of

completion of the project because of alleged poor building quality,

the structure became dilapidated and the nursing staff had to

vacate the flats being used by them and a consumer complaint filed

by the Lilavati hospital for compensation on account of annual loss

of rent was maintainable and whether the Trust was a consumer

under Section 2(1)(d) of the Act.

34. In Lilavati Kirtilal Mehta Medical Trust (supra), this Court

observed that there is no nexus between the purchase of flats by

the appellant Trust and its profit generating activity as the flats

were not occupied for undertaking any medical/diagnostic facilities

23 within the hospital, but for accommodating the nurses employed by

the hospital. In the given circumstances, it has nothing to do with

earing of profits in providing facilities to the nurses and held that

the Trust is a “consumer” under Section 2(1)(d) of the Act, 1986 for

the transaction under consideration.

35. Thus, what is important is the transaction in reference to

which the claim has been filed under the Act, 1986 by a person who

claims himself to be a “consumer” covered under Section 2(1)(d) of

the Act, 1986, such exposition of law on the subject has been

further reiterated by this Court recently in Shrikant G. Mantri v.

Punjab National Bank6 and after the analysis on the subject and

taking note of the judgment of this Court in Lilavati Kirtilal

Mehta Medical Trust (supra), of which reference has been made,

examined the case on the facts in question and recorded a finding

that the transaction in question would fall within the definition of

the term “consumer” or “services” for the purpose of invoking

jurisdiction under the Act, 1986.

6 (2022) 5 SCC 42

24

36. Thus, what is culled out is that there is no such exclusion

from the definition of the term “consumer” either to a commercial

enterprise or to a person who is covered under the expression

“person” defined in Section 2(1)(m) of the Act, 1986 merely because

it is a commercial enterprise. To the contrary, a firm whether

registered or not is a person who can always invoke the jurisdiction

of the Act, 1986 provided it falls within the scope and ambit of the

expression “consumer” as defined under Section 2(1)(d) of the Act,

1986.

37. Applying the above principles to the present case, what needs

to be determined is whether the insurance service has a close and

direct nexus with the profit generating activity and 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. The fact that the insured is a commercial

enterprise is unrelated to the determination of whether the

insurance policy shall be counted as a commercial purpose within

the purview of Section 2(1)(d) of the Act.

25

38. In the case of Karnataka Power Transmission Corporation

and Another v. Ashok Iron Works Private Limited7, this Court

while answering the question in the affirmative observed :

“17. It goes without saying that interpretation of a word or expression must depend on the text and the context. The resort to the word “includes” by the legislature often shows the intention of the legislature that it wanted to give extensive and enlarged meaning to such expression. Sometimes, however, the context may suggest that word “includes” may have been designed to mean “means”. The setting, context and object of an enactment may provide sufficient guidance for interpretation of the word “includes” for the purposes of such enactment.

18. Section 2(1)(m) which enumerates four categories, namely,

(i) a firm whether registered or not;

(ii) a Hindu Undivided Family;

(iii) a cooperative society; and

(iv) every other association of persons whether registered under the Societies Registration Act, 1860 (21 of 1860) or not while defining “person” cannot be held to be restrictive and confined to these four categories as it is not said in terms that “person” shall mean one or other of the things which are enumerated, but that it shall “include” them.

19. The General Clauses Act, 1897 in Section 3(42) defines “person”:

“3. (42) ‘person’ shall include any company or association or body of individuals, whether incorporated or not;”

20. Section 3 of the 1986 Act upon which reliance is placed by learned counsel for KPTC provides that the provisions of the Act are in addition to and not in derogation of any other law for the time being in force. This provision instead of helping the contention of KPTC would rather suggest that the access to the remedy provided to (sic under) the Act of 1986 is an addition to the provisions of any other law for the time being in force. It does not in any way give any clue to restrict the definition of “person”.

7 (2009) 3 SCC 240

26

21. Section 2(1)(m), is beyond all questions an interpretation clause, and must have been intended by the legislature to be taken into account in construing the expression “person” as it occurs in Section 2(1)(d). While defining “person” in Section 2(1)(m), the legislature never intended to exclude a juristic person like company. As a matter of fact, the four categories by way of enumeration mentioned therein is indicative, Categories (i), (ii) and

(iv) being unincorporate and Category (iii) corporate, of its intention to include body corporate as well as body unincorporate. The definition of “person” in Section 2(1)(m) is inclusive and not exhaustive. It does not appear to us to admit of any doubt that company is a person within the meaning of Section 2(1)(d) read with Section 2(1)(m) and we hold accordingly.”

39. Applying the aforesaid test, two things are culled out; (i)

whether the goods are purchased for resale or for commercial

purpose; or (ii) whether the services are availed for any commercial

purpose. The two­fold classification is commercial purpose and

non­commercial purpose. If the goods are purchased for resale or

for commercial purpose, then such consumer would be excluded

from the coverage of the Act, 1986. For example, if a manufacturer

who is producing 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, if the same manufacturer purchases a refrigerator,

television or air­conditioner for his use at his residence or even for

his office has no direct or indirect nexus to generate profits, it

27 cannot be held to be for commercial purpose and for afore­stated

reason he is qualified to approach the Consumer Forum under the

Act, 1986.

40. Similarly, a hospital which hires services of a medical

practitioner, it would be a commercial purpose, but if a person

avails such services for his ailment, it would be held to be a non­

commercial purpose. Taking a wide meaning of the words “for any

commercial purpose”, it would mean that the 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 is an activity,

which is not directly intended to generate profit, it would not be a

commercial purpose.

41. In other words, to make it further clear, let us have certain

illustrations, as to whether the transaction falls for commercial

purpose or whether the complainant can be held to be a “consumer”

within the scope and ambit of Act, 1986.

28

(i) A CT scan machine was purchased by a Charitable Trust and

that was found to be defective, the question raised whether the

machinery was purchased for a commercial purpose and whether

the appellant was a consumer. From the narration of facts, this

Court in Kalpavruksha Charitable Trust v. Toshniwal Brothers

(Bombay) Pvt. Ltd. and Another8 held that the machine was

purchased by the Charitable Trust for commercial purpose as every

person who takes a CT scan has to pay for it and the services

rendered are not free and thus the Trust was not a consumer.

(ii). In Rajeev Metal Works and Others v. Mineral & Metal

Trading Corporation of India Ltd.9, a manufacturer imported

raw material through statutory authority that acted as a canalizing

agency for manufacture and sale of the finished product. The

appellant approached the National Commission alleging that the

respondent had not supplied the required quantity demanded by

the appellant. This Court held that the purchase was for a

commercial purpose and the manufacturer was not a “consumer”

for the purpose of the Act, 1986.

8 (2000) 1 SCC 512 9 (1996) 9 SCC 422

29

(iii). The bank which had taken bankers indemnity insurance

policy from the insurance company and suffered loss owing to some

of transactions in one of its branches, raised an insurance claim

stating that it is owing to dishonesty of Branch Manager and the

claim was repudiated by the insurance company stating that the

alleged loss was because of some dishonesty of the Branch Manager

and this being for commercial purpose, may not be a consumer.

(iv). The complainant is a private limited company running a

diagnostic clinic and alleges that X­ray machine purchased by the

complainant from the opposite party was defective. If an objection

is raised that as machine was purchased for commercial purpose

and the complainant cannot be said to be a consumer as defined

under the Act, 1986 as he has been employed for commercial

purpose and has been carrying out business for profit indeed the

complainant is not a consumer under the Act, 1986.

(v). A company purchased the EPBX system for the better

management of the business of the company for commercial

purpose and the complaint filed for alleged supply of defective

system may not be covered by the explanatory clause of Section 2(1) 30

(d) of the Act, 1986 as the transaction has no nexus to generate

profits.

42. Thus, what is finally culled out is that each case has to be

examined on its own facts and circumstances and what is to be

examined is whether any activity or transaction is for commercial

purpose to generate profits and there cannot be a straight­jacket

formula which can be adopted and every case has to be examined

on the broad principles which have been laid down by this Court, of

which detailed discussion has been made.

43. Applying the above principles in the present case, what needs

to be determined is whether the insurance service had a close and

direct nexus with the profit generating activity and whether the

dominant intention or dominant purpose of the transaction was to

facilitate some kind of profit generation for the insured or to the

beneficiary and our answer is in the negative and accordingly we

are of the view that the complaint filed by the respondent insured

herein has no close or direct nexus with the profit generating

activity and the claim of insurance is to indemnify the loss which

the respondent insured had suffered and the Commission has

31 rightly held that the respondent is a “consumer” under Section 2(1)

(d) of the Act, 1986.

44. We further reiterate that ordinarily the nature of the insurance

contract is always to indemnify the losses. Insurance contracts are

contracts of indemnity whereby one undertakes to indemnify

another against loss/damage or liability arising from an unknown

or contingent event and is applicable only to some contingency or

act likely to come in future.

45. This Court in United India Insurance Company Limited v.

Levis Strauss (India) Private Limited10 has held as under:

“53.A contract of insurance is and always continues to be one for indemnity of the defined loss, no more no less. In the case of specific risks, such as those arising from loss due to fire, etc. the insured cannot profit and take advantage by double insurance. Long ago, Brett, LJ in Castellain v. Preston [Castellain v. Preston, (1883) 11 QBD 380] said that : (QBD p. 386) “….. the contract of insurance … is a contract of indemnity.

… and that this contract means that the assured, in the case of loss … shall be fully indemnified, but shall never be more than fully indemnified.”” (emphasis added)

10 (2022) 6 SCC 1

32

46. Thus, it can be concluded that in the instant case hiring of

insurance policy is clearly an act for indemnifying a risk of

loss/damages and there is no element of profit generation and still

what has been expressed by this Court is illustrative; it will always

open to be examined on the facts of each case, as to the transaction

in reference to which the claim has been raised has any close and

direct nexus with profit generating activity.

47. We do not agree with the submission made on behalf of the

appellant that if insurance claims are covered under the Act, 1986,

then virtually all insurance matters will come within the purview of

the Act, 1986 and this will render the Act, 2015 nugatory. In our

view, both these Acts have different scope and ambit and have

different remedial mechanism, are in different sphere having no

internal co­relationship.

48. Consequently, the appeals are without substance and

accordingly dismissed. No costs.

49. Let the State Commission may adjudicate the complaint of the

respondents on its own merits in accordance with law and since it

33 is an old matter, be decided expeditiously as possible, but in no

case later than one year.

50. Pending application(s), if any, shall stand disposed of.

CIVIL APPEAL NO(S).5354 OF 2007 – (United India Insurance Company Limited v. M/s Diwakar Goiram Porkhayat)

51. The present appeal is directed against the order passed by the

National Commission dated 3rd December, 2004 holding that the

insurance policy taken by the respondent (commercial unit) in the

facts of the case was only to indemnity the loss which the

respondent/complainant has suffered and the transaction in

reference to which the insurance claim has been repudiated by the

appellant, had no direct nexus with the profit generating activity

and was a “consumer” as defined under Section 2(1)(d) of the Act,

1986.

52. The respondent/complainant (insured) is doing the business

of sale and purchase of jewellery in the name and style of “Khazana

Jewellers” who obtained a policy of insurance from the appellant for

34 the period 21st October, 1999 to 20th October, 2000 to cover the risk

of ornaments in business.

53. On 24th June, 2000, at about 7.00 a.m. when an employee of

the respondent saw that the shutter of the showroom was partly

open and that was indicative of the theft and upon inspection, it

was found that goods worth Rs.20,55,200/­ were stolen from the

showroom.

54. On the claim being raised by the respondent to indemnify the

loss suffered, it was repudiated by the appellant and that was

challenged by the respondent by filing a consumer complaint before

the State Commission, Ahmedabad, that was dismissed on the

premise that the respondent was not a “consumer” within the ambit

of Section 2(1)(d) of the Act, 1986 by an order dated 1 st April, 2004.

55. The respondent challenged the order of dismissal by an appeal

before the National Commission taking note of the nature of the

transaction and relying upon the order of the Commission in the

case of M/s Harsolia Motors dated 3rd December, 2004, the

Commission held that the transaction in reference to which the

insurance claim has been raised by the respondent has no direct

35 nexus with the profit generating activity and the insurance cover

was obtained only to cover the loss, if any, being suffered on

account of theft or by natural calamity and the order passed by the

National Commission dated 3rd December, 2004 is the subject

matter of challenge in appeal before us.

56. In the light of the judgment passed by us today in Civil Appeal

Nos.5352­5353 of 2007 (National Insurance Co. Ltd. v. Harsolia

Motors and Others), the present appeal is without substance and is

accordingly dismissed. No costs.

57. The complaint is restored on the file of the State Commission

and the same be adjudicated on its own merits in accordance with

law and may be decided as expeditiously as possible, but in no case

later than one year.

58. Pending application(s), if any, shall stand disposed of.

CIVIL APPEAL NO(S).2821 OF 2012 – National Insurance Co. Ltd. v. M/s Ankur and Another.

59. The judgment under appeal is dated 15 th December, 2010

passed by the National Commission.

36

60. Brief facts of the case are that the respondent is engaged in

the business of garments in wholesale, who took a standard fire

and peril policy effective for the period from 6 th January, 2006 to 5th

January, 2007 for a total sum of Rs.60,00,000/­. There was a fire

on 28th December, 2006 resulting in damage to the factory of the

respondent. The appellant appointed spot surveyor, M/s Apex

Surveyors Pvt. Ltd. for final survey, who submitted its report on

22nd December, 2008 assessing the loss to the tune of

Rs.53,17,790/­ after deducting salvage amount of Rs.1 lakh and

factoring sound stock being saved after the fire at Rs.51,969/­. The

appellant claimed that the respondent has failed to submit certain

documents to the assessor and, therefore, assessment on such

basis could be treated as void. In the meanwhile, SARFAESI

proceedings were initiated against the respondent by Canara Bank

(secured creditor).

61. While the claim of the respondent was being processed, the

respondent filed a complaint before the State Commission claiming

Rs.60,00,000/­ along with interest. At this stage, the appellant

filed a preliminary objection that the respondent is not a

37 “consumer” within the definition of Section 2(1)(d) of the Act, 1986.

The State Commission at one stage had held that the respondent is

engaged in commercial activity and, therefore, is not a consumer.

The finding returned by the State Commission was reversed by the

National Commission under its order dated 15 th December, 2012

holding that commercial entity availing its services by the insurance

company is a “consumer” in reference to the transaction in terms of

Section 2(1)(d) of the Act, 1986.

62. We have assigned detailed reasons in Civil Appeal Nos.(5352­

5353 of 2007 (National Insurance Co. Ltd. v. Harsolia Motors and

Others). In the light of the judgment passed by us today in the

said appeal, the present appeal is without substance and is

accordingly dismissed. No costs.

63. The complaint is restored on the file of the State Commission

and the same be adjudicated on its own merits in accordance with

law and may be decided as expeditiously as possible, but in no case

later than one year.

64. It is brought to our notice that pursuant to order dated 11 th

May, 2011 of this Court, the appellant had deposited 50% of the

38 claim made by the respondent and the office report dated 15 th

February, 2023 indicates that an amount of Rs.59,74,814/­ was

invested in the fixed deposit with the maturity date of 16 th July,

2023. Let the amount be transferred to the State Commission and

the money invested in fixed deposit shall continue and may be

invested in an interest­bearing account on automatic renewal basis

and the parties shall abide by the orders of the State Commission.

65. Pending application(s), if any, shall stand disposed of.

CIVIL APPEAL NO(S).3350 OF 2018 – The Bank of New York Mellon (Formerly The Bank of New York) v. M/s METCO Export International and Others.

66. The appellant has filed the present appeal by special leave

against the judgment and order dated 6th February, 2018 passed by

the National Commission.

67. Brief facts of the case are that respondent no.1 entered into a

transaction with a third party (an Italian buyer of respondent no.1)

for supply of five containers of sesame seeds and oil seeds for USD

141,375. In relation to this transaction, the services of Federal

Bank Ltd. (respondent no.2) were availed to send the invoice, bills of

39 lading, surveyor’s certificate, bills of exchange, phytosanitary

certificate and other related documents (four documents) to the

buyer’s banker in Italy. Respondent no.2 engaged the services of

the appellant to get export documents delivered to the buyer’s

banker in Italy which in turn engaged services of a courier company

(respondent no.3). The export documents were lost in transit.

68. Respondent no.1 filed a consumer complaint before the State

Commission against the appellant, respondent no.2 and respondent

no.3. The complaint was dismissed on the premise that respondent

no.1 is not a consumer as defined under Section 2(1)(d) of the Act,

1986 by an order dated 10th December, 2013, that became the

subject matter of challenge at the instance of respondent no.1 in

appeal before the National Commission relying on the judgment in

Laxmi Engineering Works (supra) and taking note of the

judgment in the case of M/s Harsolia Motors, the National

Commission recorded a finding that the dispatch of papers by the

bank which were lost in transit and never received by the Italian

buyer per se is not related to generate any profit to the respondent

40 as the actual profit will come from the sale of the exported goods

which has no nexus to profit generating activity.

69. After we have heard counsel for the parties and considering

the view expressed by this Court in Civil Appeal Nos.5352­5353 of

2007 (National Insurance Co. Ltd. v. Harsolia Motors and Others),

the present appeal is without substance and is accordingly

dismissed. No costs.

70. The complaint is restored on the file of the State Commission

and the same be adjudicated on its own merits in accordance with

law and may be decided as expeditiously as possible, but in no case

later than one year.

71. Pending application(s), if any, shall stand disposed of.

CIVIL APPEAL NO(S). OF 2023 (@ SPECIAL LEAVE PETITION (CIVIL) NO(S).1039 OF 2020) – IFFCO Tokio General Insurance Company Limited v. M/s OPG Energy (P) Ltd.

72. Leave granted.

73. The present appeal has been filed by special leave to appeal

against the judgment and order dated 27 th September, 2019 passed

by the National Commission.

41

74. We have heard counsel for the parties and taking note of the

fact initially an ex­parte order was passed by the Consumer Forum

against the appellant on 12th September, 2014, pursuant to which

the appellant was directed to pay Rs.9,57,903/­ with interest @ 9%

per annum from the date of complaint i.e., 8 th April, 2011 and

Rs.5,000/­ towards litigation. The appeal/revision filed at the

instance of the appellant before the State Commission and National

Commission, both were dismissed by orders dated 25 th June, 2019

and 27th September, 2019 respectively.

75. After we have heard counsel for the parties, find no reason to

interfere with the impugned order and the same is accordingly

dismissed. No costs.

76. Pending application(s), if any, shall stand disposed of.

………………………J. (AJAY RASTOGI)

……………………….J.

42 (C.T. RAVIKUMAR) NEW DELHI;

APRIL 13, 2023.

43