Source: Supreme Court

Why in News?

Recently the Supreme Court held that it would be necessary to set out the manner in which consumer forums must decide technical pleas raised by service providers to the effect that the services obtained/goods bought was for a commercial purpose and, therefore, the complaint filed on behalf of such persons are not maintainable.

What was the Background of Shriram Chits (India) Pvt. Ltd. earlier known as Shriram chits (k) Pvt. Ltd. v. Raghachand Associates Case?

• The appellant (service provider) was a registered Chit Fund company. The respondent (complainant) subscribed for a certain chits in this company.
• The subscription was made for a value of Rs. 1,00,000/- and it was payable at the rate of Rs. 2500/- per month for 40 months.
• The contention of the complainant was that the appellant stopped the business illegally in 1996.
• The complainant requested the appellant to repay the chit amount, but it refused to repay and said there were certain dues owed by the complainant therefore, it adjusted the subscription amount against pending dues.
• A complaint was filed before the District Forum for illegal termination of company and non-refund of subscription amount.
• In the written submission the appellant raised an objection that complainant has not come under the definition of “consumer” as the service obtained was for a commercial purpose. Hence, complainant would stand excluded from availing any remedy under the Consumer Protection Act, 1986.
• However, the District forum was not satisfied with this contention of appellant that the complaint was not maintainable and ordered for refund of the claimed amount with interest of 18% p.a.
• An appeal was filed before the State Forum and the forum upheld the order of District forum.
• Thereafter an appeal was filed before National Consumer Disputes Redressal Commission, New Delhi (NCDRC). NCDRC agreed with the order of State forum and District forum.
• The present appeal is filed before the SC.

What were the Court’s Observations?

• The SC stated that we proceed to provide some guidance on how the issues must be framed and the manner in which the evidence must be appreciated.
• The court said that since it is always the service provider who pleads that the service was obtained for a commercial purpose, the onus of proving the same would have to be borne by it.
  • The standard of proof has to be measured against a ‘preponderance of probabilities’.
• Unless the service provider discharges its onus, the onus does not shift back to the complainant to show that the service obtained was exclusively for earning its livelihood through the means of self-employment.
• The court deconstructed Section 2(7)(i) of Consumer Protection Act, 2019 as a matter of illustration. The third part of this section is an exception to the exclusion clause [The second part is an ‘exclusion clause’ (‘carve out’)] – it relates to Explanation (a) to Section 2(7) which limits the scope of ‘commercial purpose’.
• In this case the appellant pleaded that the service was obtained for a commercial purpose, but no evidence has been led to probabilise. It is now well settled that a plea without proof and proof without plea is no evidence in the eyes of law.
• The SC affirmed the decision of NCDRC, State forum and District forum and held that there is deficiency of service on the part of appellant (service provider), therefore, appeal is dismissed.

What are the Legal Provisions Involved in this Case?

• Section 2(1)(d) of the Consumer Protection Act, 1986 (Old Act):

"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 service 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 service 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 service for any commercial purpose.

Explanation. —For the purposes of this clause, —

(a) the expression "commercial purpose" does not include use by a person of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of self-employment;

• New Act:
  • The existing provision in the new act, that is the Consumer Protection Act, 2019 has been renumbered as Section 2 (7)(i).
  • A hereinafter mentioned explanation was also added to the existing provision in the new act.

(b) the expressions "buys any goods" and "hires or avails any services" includes offline or online transactions through electronic means or by teleshopping or direct selling or multi-level marketing;