Back
SUPREME COURT OF INDIA
AJAY RASTOGI, C.T. RAVIKUMAR, JJ.
NATIONAL INSURANCE CO. LTD. - APPELLANT(S)
VERSUS
HARSOLIA MOTORS AND OTHERS - RESPONDENT(S)
CIVIL APPEAL NO(S). 5352-5353 OF 2007 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)
Decided On : 13-04-2023
(A) Consumer Protection Act, 1986 – Section 2(1)(d)[Consumer Protection Act, 2019 – Section 2(7)(ii)] – Consumer complaint – Maintainability – Commercial purpose – There is no such exclusion from definition of term “consumer” either to a commercial enterprise or to a person who is covered under expression “person” defined in Section 2(1)(m) of Act, 1986 merely because it is a commercial enterprise – Fact that insured is a commercial enterprise is unrelated to determination of whether insurance policy shall be counted as a commercial purpose within purview of Section 2(1)(d) of Act – If goods are purchased for resale or for commercial purpose, then such consumer would be excluded from coverage of Act, 1986 – Profit is 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 – 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 strait-jacket formula which can be adopted and every case has to be examined on broad principles which have been laid down by Supreme Court. (Paras 36, 37, 39, 40 and 42)
(B) Consumer Protection Act, 1986 – Section 2(1)(d)[Consumer Protection Act, 2019 – Section 2(7)(ii)] – Commercial Courts Act, 2015 – Section 2(1)(XX) – Consumer complaint – Maintainability – Commercial purpose – Ordinarily, nature of insurance contract is always to indemnify 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 – Hiring of insurance policy is clearly an act for indemnifying a risk of loss/damages and there is no element of profit generation – Complaint filed by respondent insured herein has no close or direct nexus with profit generating activity and the claim of insurance is to indemnify loss which respondent insured had suffered and Commission has rightly held that respondent is a “consumer” under Section 2(1) (d) of Act, 1986 – If insurance claims are covered under Act, 1986, then virtually all insurance matters will come within purview of Act, 1986 and this will render Act, 2015 nugatory – Both these Acts have different scope and ambit and have different remedial mechanism, are in different sphere having no internal co-relationship. (Paras 43, 44, 46 and 47)
Facts of the case:
Assail in the present appeals by special leave is to judgment and order passed by the National Consumer Disputes Redressal Commission dated 3rd December, 2004, whereby National Commission, while reversing finding of Gujarat State Consumer Disputes Redressal Commission, regarding maintainability of the complaint filed at the instance of respondent under Consumer Protection Act, 1986 held that a person who takes insurance policy to cover 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.
Findings of Court:
In 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 facts of each case, as to the transaction in reference to which claim has been raised has any close and direct nexus with profit generating activity.
Result : Appeal dismissed.
Key Points: - The Act is social-benefit oriented and should be construed in favor of the consumer; purpose is protection of consumers (!) (!) - Section 2(1)(d) defines "consumer" and excludes those who purchase for resale or for any commercial purpose; explanations clarify when purchases for self-employment remain within the definition (!) (!) (!) (!) (!) - Insurance is typically a contract of indemnity with no profit intention; whether it is for commercial purpose depends on facts and whether there is a close direct nexus to profit generation (!) (!) (!) (!) - Court clarified that a commercial enterprise can still be a consumer if the dominant purpose is not to generate profit from the transaction; no blanket exclusion for commercial entities (!) (!) (!) - Precedents and illustrations (Laxmi Engineering Works, Kalpavruksha, Lilavati Kirtilal Mehta, Shrikant G. Mantri) discuss the case-by-case assessment of "commercial purpose" with broad principles rather than rigid formulas (!) (!) (!) (!) - The decision in National Insurance Co. v. Harsolia Motors and related cases held that insurance claims by commercial entities can fall within the Consumer Protection Act if there is no direct nexus to profit generation; both Acts (1986 and 2015) have distinct scopes (!) (!) (!) (!)
JUDGMENT :
Rastogi, J.
CIVIL APPEAL NO(S).5352-5353 OF 2007
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 28th February, 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 28th 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 post-Godhra 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 28th February, 2002 and the respondent/complainant was entitled to be indemnified the insured sum under the policy of insurance.
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, 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 t
Insurance policy is availed for indemnifying loss which insured may suffer and services of Insurer are availed for protection and not for making profit.
The issue whether the Complainant is entitled for compensation for the losses of license of its employees from the Respondent/OP-Insurance Company, and if so, the determination of the amount is not a....
Basic Amenities - In the present case, the Opposite Party Authority had completely failed to provide basic amenities like approach roads on the sides of the allotted Plots, which is a clear case of d....
An indispensable Tool for Legal Professionals, Endorsed by Various High Court and Judicial Officers
Please visit our Training & Support
Center or Contact Us for assistance
Scan Me!
India’s Legal research and Law Firm App, Download now!
For Daily Legal Updates, Join us on :
Back to top
