Purchase of car for Company Director’s use is not Commercial

Corporate Bodies purchase flats, cars, etc. for the use of their Directors. This latest decision of the National Commission dt. 8 July 2016 clarifies that such purchase does not constitute commercial use.

http://cms.nic.in/ncdrcusersWeb/GetJudgement.do?method=GetJudgement&caseidin=0%2F0%2FOP%2F51%2F2006&dtofhearing=2016-07-08

NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION
NEW DELHI

 

 
CONSUMER CASE NO. 51 OF 2006
         

 

1. CROMPTON GREAVES LIMITED & ANR.
C.G.HOUSE, 6th Floor, Dr. A.B. Road, Worli,
Mumbai – 400 030.
2. MR. SUDHIR M. TREHAN
MANAGING DIRECTOR OF COMPLAINANT NO.1, RESIDING AT FIRST FLOOR, PRIYADARSHINI APTS. PLOT NO. 23, 6th North South Road, JVPD Scheme,
Mumbai – 400 056.
………..Complainant(s)
Versus
1. DAIMLER CHRYSLER INDIA PRIVTE LIMITED & ORS.
(Earlier Known As Mercedes-Benz India Ltd.) Sector 15-A, Chikhali, Pimpri,
Pune-411 018
2. DAIMLER CHRYSLER AG,
THROUGH ITS AGENT DAIMLER CHRYSLER INDIA PVT. LTD., OFFICE AT. SECTOR -15-A, CHIKHALI, PIMPRI,
PUNE-411 018.
3. AUTO HANGER (INDIA) PVT. LTD.
MODAK RUBBERS & TEXTILE LTD. COMPOUND 6, KONDIVITTA ROAD, OPP. MAROL BAZAR, ANDHERI (EAST),
MUMBAI – 400 059.
………..Opp.Party(s)

 

BEFORE:
HON’BLE MR. JUSTICE D.K. JAIN, PRESIDENT
HON’BLE MR. JUSTICE V.K. JAIN, MEMBER
HON’BLE DR. B.C. GUPTA, MEMBER

 

For the Complainant :  
Mr. Amir Singh Pasrich, Advocate
Mr. Sanjay Bajaj, Advocate
Mr. Kalyan Arambam, Advocate
Mr. Kaustubh Seth, Advocate
Ms. Priyanka Raj, Advocate

 

For the Opp.Party :
Mr. M.S. Pandit, Advocate
Mr. Harish Sandhu, Advocate

Dated : 08 Jul 2016

ORDER
JUSTICE V.K. JAIN, MEMBER 

Noticing an apparent conflict in the decisions rendered by this Commission in Controls and Switchgear Company Ltd. Vs. Daimler Chrysler India Pvt. Ltd. and T and T Motors Ltd. IV (2007) CPJ 1 (NC) and General Motors Pvt. Ltd. Vs. G.S. Fertilizers Pvt. Ltd. [First Appeal No. 723 of 2006] decided on 07.02.2013, both rendered by Benches comprising two Members, the following issue was referred to this larger Bench, for decision:-

  • Whether the purchase of a car or any other goods by a company for the use/personal use of its Director amounts to purchase for a commercial purpose, within the meaning of Section 2(1)(d) of the Consumer Protection Act, or not.

 

 

2.      In Controls and Switchgear Company Ltd. (supra), a complaint alleging defects in two Mercedes Benz, cars purchased by the complainant company for the use of its directors, was filed before this Commission. The complaint was resisted inter-alia on the ground that the cars were purchased for a commercial purpose. Rejecting the contention, this Commission inter-alia held as under:

In our view, there is no substance in the aforesaid contention, because:

  • Company is a legal entity and is entitled to file complaint;
  • The cars are purchased for the use of the Directors and are not to be used for any activity directly connected with commercial purpose of earning profit. Cars are not used for hire but are for the personal use of the Directors. Hence, it cannot be said that the complainant company has purchased the cars for commercial purpose.

 

An appeal against the above-referred decision is pending before the Hon’ble Supreme Court.

In General Motors Pvt. Ltd. (supra), a complaint alleging defect in a car purchased by the complainant company for use of its Managing Director was filed before the concerned State Commission. The complaint was resisted inter-alia on the ground that purchase of the vehicle for the use of the Managing Director of the company amounted to  purchase for a commercial purpose. Accepting the said contention, this Commission inter-alia held as under:

“We note that in his complaint before the State Commission the Respondent-Complainant had clearly stated that the vehicle was purchased for the use of its Managing Director.  We agree with Appellants’ contention that this clearly amounts to its purchase for a ‘commercial purpose’ since the Managing Director of a private limited company would obviously not use this vehicle for self-employment to earn his livelihood but for ‘commercial purposes’ as a perk of his office. Counsel for the Respondent-Complainant has sought to challenge this contention by pointing out that since the present case pertains to 1999 and the amendment referred to was made only in 2002, it was not applicable in the instant case.  We are unable to agree with this contention as well because the 2002 Amendment to the Act pertains to Section 2(1)(d)(ii) of the Act relating to hiring or availing of services for a consideration and not to Section 2(1)(d)(i) of the Act which relates to purchase of goods.  In fact, the interpretation of Section 2(1)(d)(i) of the Act relating inter alia to purchase of goods has been well settled by the Hon’ble Supreme Court as far back as in 1995 in its judgment in Laxmi Engineering Works v. P.S.G. Industrial Institute [1995 (3) SCC 583], wherein the Hon’ble Apex Court has ruled as follows:

“… On this interpretation of the definition clause, persons buying goods either for resale or for use in large scale profit-making activity will not be ‘consumers’ entitled to protection under the Act.  It seems to us clear that the intention of Parliament as can be gathered from the definition section is to deny the benefits of the Act to persons purchasing goods either for purpose of resale or for the purpose of being used in profit-making activity engaged on a large scale.  It would thus follow that cases of purchase of goods for consumption or use in the manufacture of goods or commodities on a large scale with a view to make profit will all fall outside the scope of the definition. 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.”

 

            Since the instant case pertains to the purchase of goods admittedly for ‘commercial purposes’ since the vehicle was purchased by a private limited company for its Managing Director, this case is squarely covered by the above judgment of the Hon’ble Apex Court.  The State Commission erred in not taking note of this important fact while deciding the complaint.” 

3.      Section 2(1)(d) of the Consumer Protection Act which defines the term ‘consumer’, to the extent it is relevant, reads as under:-

          “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 purposes;

 

It would thus be seen that the emphasis is on the purpose for which the goods are obtained, though the use to which the goods are actually put would be helpful in deciding the purpose for which they were obtained.

4.      The term ‘commercial purpose’ has not been defined in the Consumer Protection Act and as held in Laxmi Engineering Works v. P.S.G. Industrial Institute [(1995) 3 SCC 583], in the absence of a statutory 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” (Collin’s English Dictionary) and the word ‘commerce’ means “financial transactions, especially buying and selling of merchandise on a large scale” (Concise Oxford Dictionary)”.

 4.     Going by the dictionary meaning, a car or for that matter any goods obtained and the services hired or availed by a company can be said to have been obtained or  hired or availed for a commercial purpose, only if the said goods or services are intrinsically connected with, or related to the business or commerce in which the company is engaged. The acquisition of the goods or the hiring or availing of services, in order to bring the transaction within the purview of section 2 (1) (d) of the Consumer Protection Act, therefore, should be aimed at generating profits for the company or should otherwise be connected or interwoven with the business activities of the company. The purpose behind such acquisition should be to promote, advance or augment the business activities of the company, by the use of such goods or services. As observed by the Hon’ble Supreme Court in Laxmi Engineering Works (supra),  it is not the value of the goods but the purpose for which the goods are brought or put to use, which is relevant to decide whether the goods were obtained for a commercial purpose or not. The same would be the position, where services are hired or availed by a company. If the business activities of a company cannot be conveniently undertaken without the goods purchased or the services hired or availed by a company, such purchase or hiring/availing as the case may be, would be for a commercial purpose, because the objective behind such purchase of goods or hiring or availing of the services would be to enable the company to earn profits by undertaking and advancing its business activities.

5.      If a car or other goods are purchased or the services are hired or availed by a company for the personal use of its directors or employees, the purpose behind such acquisition is not to earn profits or to advance the business activities of the company. The purpose is to make certain facilities and amenities available to the directors and employees of the company as a part of the incentive offered to them by the company, as a reward or remuneration for the work which they are expected to perform for the company. It is not as if a company cannot run its business without providing such facilities and amenities to its directors and employees. It is not necessary for the business of the company, to provide such facilities and amenities to its directors and employees. Providing such facilities and amenities only motivates them to perform their work in an efficient and congenial environment, besides serving as an incentive aimed at eliciting better performance.  The company does not earn profit merely by making a car or certain other goods or services available to its directors and employees. Therefore, it would be difficult to say that such goods are purchased or the services are hired or availed by the company for a commercial purpose.

6.      The goods and services made available by a company to its directors or employees can be classified into the following three broad categories:-

(a) The goods and services which are obtained for and made available to the directors or employees of the company and are used by them only for their personal purposes, unconnected with the business of the company. For instance, the cars used by the directors and employees of the company for their shopping, outings, recreations, etc. or for commuting to and from the office of the company. Another example can be the air conditioners and furniture provided at the residence of the directors and employees of the company or the telephone or broadband got installed by the company at their residence.

(b) The goods and services made available to the directors or employees of the company and used by them primarily for their personal purposes but incidentally, also for the purposes of the company. For instance, a car used mainly for outings, recreations, personal commuting etc. of the directors and employees or their families, but also for visiting the factory and offices of the company or attending the business meetings.

(c) The goods and services made available by a company to its directors and employees primarily for the purposes of the company and used by them mainly for the purposes of the company but incidentally also for their personal purposes. For instance, a vehicle purchased for being used as a staff car or a delivery van, but sometimes also used for the personal purposes of the directors or employees, unrelated to the business of the company.

7.      As far as the goods and services falling in category (a) are concerned, there can be no dispute that since such goods were purchased or the services were hired or availed by the company and made available to its directors and employees for the purposes wholly unrelated to the business activities of the company, such an acquisition cannot be said to be for a commercial purpose. No commercial purpose of the company is achieved by purchasing such goods or hiring or availing such services and then making them available to its directors and employees.

8.      In our opinion even if such goods or services are incidentally used by the directors or employees of the company for the purposes of the company, that would not lead to the conclusion that the acquisition of such goods or services was for a commercial purpose. The dominant purpose behind such acquisition being to provide an amenity to the directors or the employees as the case may be, it cannot be said that the company was seeking to make a profit or advance its business by such an acquisition.  The use for the purposes of the company being subsidiary and incidental in nature, cannot override the dominant purpose for which they were acquired and made available to the director or the employee of the company. Therefore, the acquisition of goods and services, even if they fall under category (b) above, cannot be said to be for a commercial purpose.

9.      As far as the goods or services falling in category (c) are concerned, since the dominant purpose behind such acquisition is to advance and sustain the business activities of the company and the use for the personal purposes of the directors or the employees being incidental, it can be safely said that such an acquisition was for the commercial purposes of the company.

10.    In Laxmi Engineering Works (supra),  the Hon’ble Supreme Court inter-alia observed as under:-

“…On this interpretation of the definition clause, persons buying goods either for resale or for use in large scale profit-activity will not be ‘consumers’ entitled to protection under the Act. It seems to us clear that the intention of Parliament as can be gathered from the definition section is to deny 446 the benefits of the Act to persons purchasing goods either for purpose of resale or for the purpose of being used in profit making activity engaged on a large scale. It would thus follow that cases of purchase of goods for consumption or use in the manufacture of goods or commodities on a large scale with a view to make profit %ill all fall outside the scope of the definition. 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. “

 

Relying upon the above-referred observations, it was contended by the learned counsel for the opposite party that the purpose behind enactment of Consumer Protection Act was to provide a speedy remedy to the small consumers and the Act is not intended for the benefit of large business entities such as corporates.  We, however, find nothing in the judgment which would indicate that a company will not be a consumer within the meaning of the Act even if the goods are obtained or the services are hired or availed by it, for a purpose which by no means, can be said to be a commercial purpose. The Apex Court itself emphasised that for the exclusion to apply, there has to be a close nexus between the transaction of purchase of goods and the large scale activity, carried for earning profit. Therefore, if a transaction of purchase of goods or hiring or availing of services is not aimed at earning profits or advancing the business activities of the purchaser, such a transaction will not be out of the purview of the Consumer Protection Act.

          The learned counsel for the opposite party relying upon the decision of a two Members Bench of this Commission in Duggirala Prasad Babu Vs. M/s Skoda Auto India Pvt. Ltd. [Revision Petition No.428 of 2013] decided on 4.3.2014, contended that since depreciation is claimed by the company  on the car purchased for its director, such a purchase would be for a commercial purpose. We, however, find no merit in the submission. Whether a company or for that matter any other purchaser is entitled in law to claim depreciation in respect of a car or other goods purchased primarily for the personal purposes of its directors or employees is not a question to be considered by this Commission. What this Commission has to see is the purpose behind purchase of the goods or hiring or availing the services as the case may be and if depreciation is found to be wrongly claimed, it would be for the concerned department to take note of such a tax evasion. Therefore, we are not in agreement with the view taken in the above-referred decision.

          The learned counsel for the opposite party referred to the decision of the Hon’ble Supreme Court in Chairman, Thiruvalluvar Transport Corporation Vs. Consumer Protection Council [Civil Appeal No.7142 of 1993]decided on 9.2.1995, where the Hon’ble Supreme Court was concerned with the question as to whether this Commission has jurisdiction to adjudicate upon a claim for compensation arising out of a motor vehicle accident or not. The above-referred decision has absolutely no application to the issue involved in this complaint and, therefore, reliance upon the said decision is wholly misplaced.

          The learned counsel for the opposite party also relied upon the decision of this Commission in Interfreight Services Pvt. Ltd. Vs. Usha International 1(1995) CPJ 128 (NC), where this Commission inter-alia observed that the special remedy before the consumer forums can be invoked only by ordinary consumers, purchasing goods for their private and personal use and consumption and not by business organization buying goods for commercial purposes. There is no quarrel with the legal proposition that the provisions of the Consumer Protection Act are not for the benefit of business organizations buying goods for commercial purposes, but at the same time, such organisations are not ousted from the purview of the said Act, where the goods bought or the services hired or availed by them are not for commercial purposes.

11.    For the reasons stated hereinabove, the issue referred to the larger Bench is answered as follows:-

(a) If a car or any other goods are obtained or any services are hired or availed by a company for the use/personal use of its directors or employees, such a transaction does not amount to purchase of goods or hiring or availing of services for a commercial purpose, irrespective of whether the goods or services are used solely for the personal purposes of the directors or employees of the company or they are used primarily for the use of the directors or employees of the company and incidentally for the purposes of the company.

(b) The purchase of a car or any other goods or hiring or availing of services by a company for the purposes of the company amount to purchase for a commercial purpose, even if such a car or other goods or such services are incidentally used by the directors or employees of the company for their personal purposes.

         

 

………………….J
D.K. JAIN
PRESIDENT
………………….J
V.K. JAIN
MEMBER
………………….
DR. B.C. GUPTA
MEMBER

 

 

Pendency and Reduction of Complaints – Consumer Protection Act


Pendency and Reduction of Complaints – Consumer Protection Act.

 

There is a huge pendency of Complaints at all levels.
It can be reduced if the Consumer Forums take a pro-consumer reconciliatory approach.

In a recent case, the President of a District Consumer Forum heard the matter from all sides (even though it was not fixed for final hearing).

He asked me if the matter could be mutually settled.
When I made a very fair and reasonable offer, the other side refused.

The President told the Opposite Party that he had no case.
If he accepted the offer, well and good, otherwise he would pass an order against the Opposite Party.

I hope the matter would be resolved soon.
This is a very fair and reasonable approach.
Other Forums should follow it.

Gandhi Hospital officials held for accepting Rs. 4-lakh bribe

 

Mahatma Gandhi Memorial Hospital officials held for accepting Rs. 4-lakh bribe

 

Monday 5, July 2016

A Complainant had approached the National Consumer Commission in New Delhi with grievances against the Mahatma Gandhi Memorial Hospital in Parel, Mumbai and the Commission had ordered the hospital to pay him compensation.

Gajanan Bhagat (48) the medical superintendent and Kishore Wagh (42) medical records librarian allegedly demanded Rs. 4 lakhs from the Complainant to sanction the payment, and asked him to hand over the money to a middleman Sandesh Kamble, after which he approached the ACB.

As the complainant could only come up with Rs. 1 lakh in cash, the ACB hid fake currency notes amid real ones to give the impression that the full bribe amount was being paid to the accused.

 “The complainant had several conversations with the accused after we initiated inquiries, and in all these conversations, the accused refused to lower the bribe money and were unwilling to accept it in instalments. The complainant was able to come up with Rs. 1 lakh in cash. So, we hid toy currency notes used in board games amid real ones to give the impression that the full amount was being paid when we laid a trap,” said an ACB officer.

The Mumbai unit of the Maharashtra Anti-Corruption Bureau laid a trap and the arrested all three while accepting the money.

They have been charged under the Prevention of Corruption Act. Searches are currently under way at the offices and residences of Bhagat and Wagh.

Attack By Builder

Hindustan Times – Four held for attacking doctor with swords

HT Correspondent | Updated: Jun 28, 2016 12:07 IST

MUMBAI: Officials of the crime branch unit 4 have arrested four people on Monday for assaulting a Parel-based 43-year-old doctor at the behest of a local builder.

According to police officials, six people assaulted Dr Naveen Gupta while he was on his way home from his dispensary.
The four accused have been identified as Raja Devendra, 47, Deepak Chourasia, 23, Sandeep Pillai, 27, and Rupesh Dolkar, 26.
Gupta sustained 24 stitches and was discharged on Monday.

An officer from the crime branch said, “Last week, six people accosted the doctor’s car near Parel and assaulted him with sickles and swords. He was injured and admitted to the hospital.”
“The four accused said a builder paid them to attack the doctor. Both were living in the same society and had fought due to parking, and other society issues. Recently, the builder met Devendra, said he was tired of fighting with the doctor daily, and asked him to do something about it.”
Devendra hatched the plan to attack Gupta.

“The group had been trying to attack Gupta for the past two months but were unsuccessful,” added an officer.
The accused have been booked under relevant sections of Indian Penal Code, Arms Act and the Bombay police Act.
They were handed over to the Kalachowkie police for further probes.

Sanjay Veera, the main culprit, was arrested by the Crime Branch from his residence on 26 June and let off…
No one knows how, why and for what consideration.