1. Import of machinery for business — defects reported — claim for loss under Consumer Protection Act, 1986 — dismissal by National Commission. (Para 2 , 3 , 4 )
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1999 Supreme(SC) 732
SUPREME COURT OF INDIA
R.P.Sethi : S.Saghir Ahmad
Stereocraft
Versus
Monotype India Limited, New Delhi
Case No. : 4482 of 1990
Date of Decision : 7/21/99
A person purchasing goods for commercial purposes is not a "consumer" under the Consumer Protection Act, 1986, if the maintenance services provided are part of the original sale transaction and not separately hired for consideration.
Headnote:(A) Consumer Protection Act, 1986 - Section 2(1)(d)(ii) - Definition of "consumer" - Person who hires or avails of any services for a consideration - Whether services provided as part of a sale transaction constitute "hiring of services" - If services are rendered in compliance with the terms of the sale transaction, the party cannot be treated as a "consumer" under the Act. (Paras 5, 7)
Facts of the case:
An entity imported a phototype-setting machine for its printing press business. The machine was found to be defective, and the agent of the manufacturer provided maintenance services. A claim was filed for loss suffered due to the failure to supply a defect-free machine and failure to maintain it in proper working condition. The claim was dismissed by the lower commission on the ground that the purchase was for commercial purposes and the claim was barred by limitation.
Findings of Court:
The services rendered by the agent were in compliance with the clauses of the sale transaction. Therefore, it cannot be said that the services were hired for consideration. Furthermore, since the machinery was used for nearly three years, the claim for replacement or compensation based on the expected run hours was not legally sustainable.
Issues: Whether a party purchasing machinery for commercial purposes, where maintenance services are provided as part of the sale agreement, qualifies as a "consumer" under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986.
Ratio Decidendi: The court held that when services are rendered as part of a sale transaction in accordance with the agreement, such services do not constitute the hiring of services for consideration. Consequently, the purchaser for commercial purposes does not fall within the definition of a "consumer" under the Act.
Result: Appeal dismissed.
Legal Category Hierarchy
Table of Contents
2. Whether a business entity availing services as part of a sale transaction qualifies as a consumer under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986. (Para 5 )
3. Services rendered in compliance with sale transaction terms do not constitute hiring for consideration; prolonged usage precludes claims for replacement based on expected run hours. (Para 6 , 7 )
4. Services provided as part of a sale transaction do not render a commercial purchaser a consumer under Section 2(1)(d)(ii) of the Consumer Protection Act, 1986. (Para 7 )
5. Appeal dismissed. (Para 8 )
6. Does a person who avails of services provided as part of a sale transaction qualify as a consumer under the Consumer Protection Act, 1986?
No. If services are rendered in compliance with the terms of a sale transaction, it cannot be said that the person hired the services for consideration, and thus they are not a consumer under Section 2(1)(d)(ii) of the Act. (Para 7 )
7. Can a commercial entity be treated as a consumer under the Consumer Protection Act, 1986?
Generally, if a purchase is made for a commercial purpose, the purchaser cannot be treated as a consumer within the meaning of Section 2(1)(d)(ii) of the Consumer Protection Act, 1986. (Para 4 )
8. Does the failure of machinery to reach its expected operational hours entitle a user to replacement after several years of use?
No. If the machinery has been worked for a significant period, the user cannot legally claim replacement or compensation solely because the machine did not reach its expected total run hours. (Para 7 )
(1) THIS appeal is directed against the judgment dated 13/7/1990 passed by the National Consumer Disputes Redressal Commission, New Delhi.
(2) IN May, 1984, the appellant imported phototype-setting machine from West Germany after opening a letter of credit in favour of the manufacturer M/s. H. Berthold, AG, Berlin. The respondent M/s. Monotype India Ltd., New Delhi is the agent and distributor of the manufacturing German Company in India. The machine was installed at the complainants business premises on 17/8/1984. But soon thereafter, it was found to be defective in many respects which were brought to the notice of the respondent who attended to the complaints between 17/8/84 and 23/3/87, but the machinery remained defective and could work properly only for 152 hours as against the expected run of 12500 hours.
(3) CONSEQUENTLY, the appellant filed a claim petition before the National Commission for a sum of Rs.11,22,000.00 for the loss suffered by them on account of the failure of the respondent to supply a defect free machine and to service and maintain the same in proper working condition.
(4) THE claim was dismissed by the Commission on the ground that the machine was purchased by the appellant for its printing press business and since the purchase was for a commercial purpose, the appellant could not be treated as "consumer" within the meaning of the definition of that expression contained in Section 2(l)(d)(ii) of the Consumer Protection Act, 1986, The Commission also found that the claim of the appellant was barred by limitation.
(5) WE have heard learned counsel for the appellant. It is contended by the learned counsel that the appellant had not only purchased the machine from the respondent, they had also hired and availed of the services of the respondent for keeping the machine in a defect free condition. It is contended that since the appellant hired and availed of the services for a consideration which had already been paid to the respondent, the appellant has to be treated as a "consumer" within the menaing of subclause (ii) of Clause l(d) of Section 2 of the Act. According to this subclause, a consumer would be a person who"(ii) hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promises, or under any system of deferred payment and includes any beneficiary of such services other than the person who hires or avails of the service for consideration paid or promises, 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 :"
(6) WE are not prepared to accept the contention advanced by the appellant. From the documents filed before the Commission, it appears that the manufacturer had inter alia, agreed, as part of the sale transaction, as follows:
(7) AFTER installation of the machinery, in the business premises of the appellant, it was found to be defective. The defects were reported to the respondent as part of the sale transaction and in terms of cluases 7,8,10 and 14 quoted above, the respondent rendered the services to the appellant. But even then, as the appellant says, the machinery could not work properly. Since the service was rendered by the respondent was in compliance of clauses 7 and 8 of the sale transaction between the appellant and the manufacturer, it could not be said that the appellant had hired the services of respondent for consideration. Consequently, the appellant cannot be treated as "consumer" within the meaning of subclause (ii) of clause (d)( 1 ) of Section 2 of the Act. The appellant on his own showing had worked the machinery for about three years from 17/8/84 when it was installed at its premises upto at least 23/3/1987. After having worked the machinery for such a long period, the appellant could not legally claim the replacement of the machinery or compensation, for the reason tha
