Case Note & Summary
The dispute arose from an industrial unit's attempt to procure imported G.P. Steel Sheets through the Mineral & Metal Trading Corporation of India Ltd., a statutory canalising agency constituted by the Government of India. The appellant firm, Rajeev Metal Works & Ors., had applied to the District Industry Centre, Unnao on 13.6.1986 for supply of about 300 M.T. of G.P. Steel Sheets for its manufacturing activities. The General Manager recommended the requirement, and on 24.8.1987 the respondent informed the appellant that it could arrange supply of 50 M.T. and directed opening of letters of credit subject to terms. The appellant opened a letter of credit with the respondent for 50 M.T. The respondent pooled requirements from various industries and placed a consolidated indent with a foreign seller, but the foreign seller faced production difficulties and invoked force majeure. Eventually the respondent obtained supply of 20% of the quantity from another supplier at the same price and asked the appellant to accept reduced quantity. The appellant did not confirm acceptance, and when the goods arrived, the banker returned documents because the letter of credit was not valid. The appellant sent a telegram on 5.12.1988 agreeing to accept goods without prejudice to legal remedies but then failed to take delivery by 26.12.1988. The respondent sold the goods to an alternative buyer after paying demurrage and other charges. The appellant filed a complaint before the National Consumer Disputes Redressal Commission under Section 21 of the Consumer Protection Act, 1986, claiming damages of Rs.17,71,038/- for alleged deficiency in service. The Commission dismissed the complaint on 12.11.1992, holding that the transaction was one of sale of goods for commercial purpose and not an agreement for rendering service. The appellant appealed to the Supreme Court under Section 23 of the Act. The appellant argued that the respondent had undertaken to render service by procuring goods and that deficiency in service caused loss; further, the term 'commercial purpose' should be construed narrowly to exclude only direct resale, not manufacturing into a different commodity. The respondent contended that the appellant bought goods for commercial purpose and was excluded from consumer definition. The Supreme Court examined Section 2(1)(d) and held that the exclusionary clause clearly excluded persons obtaining goods for resale or any commercial purpose. It found that the respondent acted as a canalising agency without undertaking direct responsibility for supply, and the appellant intended to purchase goods for commercial purpose, i.e., for manufacture and resale as finished goods. Accordingly, the Court dismissed the appeal and upheld the Commission's order.
Headnote
A) Consumer Law - Definition of Consumer - Commercial Purpose Exclusion - Consumer Protection Act, 1986, Section 2(1)(d)(i) - The appellant firm sought supply of G.P. Steel Sheets for manufacturing and resale as finished goods, which constituted obtaining goods for commercial purpose - The Court reasoned that the exclusionary clause in Section 2(1)(d) removes buyers obtaining goods for resale or any commercial purpose from the protection of the Act - Held that the appellant was not a consumer under clause (i) (Paras 4-6). B) Consumer Law - Service vs Sale of Goods - Canalising Agency's Role - Consumer Protection Act, 1986, Section 2(1)(d)(ii) - The respondent, a statutory canalising agency, acted as intermediary for procurement without undertaking direct responsibility for supply or liability for non-supply - The Court held that the transaction was one of sale of goods for commercial purpose and not an agreement for rendering service for consideration - Therefore, the appellant did not hire or avail services of the respondent under clause (ii) (Paras 4-6). C) Consumer Law - Interpretation of Exclusionary Clause - Legislative Intent - Consumer Protection Act, 1986, Section 2(1)(d) - Although the definition of consumer is to be interpreted broadly, the legislative intent behind the exclusionary clause is to exclude commercial transactions from the Act's purview - The Court observed that the exclusionary clause clearly covers transactions where goods are obtained for resale or any commercial purpose - Held that the Commission correctly dismissed the complaint as not maintainable before consumer forum (Paras 4-6).
Issue of Consideration
Whether the appellant-firm was a 'consumer' under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986; Whether the transaction of procuring G.P. Steel Sheets through the respondent canalising agency constituted service or sale of goods for commercial purpose.
Final Decision
The Supreme Court dismissed the appeal, upholding the Commission's order that the transaction was for commercial purpose and not a consumer dispute. The Court held that the appellant intended to purchase goods for commercial purpose, i.e., for manufacture and resale as finished goods, and therefore was excluded from the definition of consumer under the Act.
Law Points
- Consumer under Section 2(1)(d)(i) and (ii) of the Consumer Protection Act
- 1986
- commercial purpose exclusion
- service vs sale of goods
- canalising agency not undertaking direct supply liability
- broad interpretation of consumer definition subject to statutory exclusions
