April 24, 2023 In Uncategorized


Recently, a two Judge Bench of the Supreme Court comprising of Justice Ajay Rastogi and Justice CT Ravikumar passed a judgment dated 13.04.2023 in National Insurance Co. Ltd. v. Harsolia Motors and Ors. in Civil Appeal No. 5352-5353 / 2007, and held that a commercial enterprise can file consumer complaints under the Consumer Protection Act, 1986 (Act) in relation to any goods that are purchased not for any resale / commercial purposes / any profit-generating activity.


In the present case, one, Harsolia Motors (Respondent No. 1) had taken a fire insurance policy for Rs. 75,38,000/- and one, Rakesh Narula and Co. (Respondent No. 2) had taken a fire insurance policy for Rs. 90,00,000/- from the National Insurance Co. Ltd. (Appellant-Insurer). On 28.02.2002, a fire broke out during the course of Godhra riots and as a result, the Respondent Nos.1 and 2’s goods were damaged due to fire. The Appellant-Insurer rejected the claim of the Respondent No.1, but accepted that of the Respondent no. 2 to the extent of Rs. 54,29,871/-. The Respondent No. 1 filed Complaint No. 107 / 2003 against the Appellant-Insurer before the Gujarat State Commission Disputes Redressal Commission (State Commission). The Respondent No. 2 had filed a similar Complaint before the State Commission.

The State Commission vide Order dated 01.04.2004 held that the Respondent No. 1 is not covered under the expression “Consumer” as defined under Section 2 (1) (d) of the Act and held that the Complainant being a company running a business from the premises to earn profits, falls under the scope of “commercial purpose” and thus, the Complaint is not maintainable under the provisions of the Act. A similar order was passed by the State Commission against the Respondent No. 2 as well.

Thus, aggrieved by the abovementioned Orders of the State Commission, the Respondents No. 1 and 2 filed FA/159/2004 and FA/161/2004 before the National Consumer Dispute Redressal Commission (NCDRC). The NCDRC in FA/159/2004 passed an Order dated 03.12.2004 and reversed the finding of the State Commission and held 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 are purchased or services are hired for an activity which is not intended to generate profit, it would not be deemed to be for commercial purpose. Accordingly, the NCDRC passed the Order in favor of the Respondent No. 1. The NCDRC passed a similar order in FA/161/2004 in favor of the Respondent No. 2.

Aggrieved by the NCDRC Orders, the Appellant-Insurer filed Civil Appeal No. 5352-5353 / 2007 before the Supreme Court.


Whether the insurance policy taken by the insured amounts to hiring of service for “commercial purpose”, thus excluding them from the ambit of the expression “consumer” under the Act?


The Apex Court passed a Judgment dated 13.04.2023 in Civil Appeal No. 5352-5353 / 2007 and made the following observations:

(1) That as per the object and purpose of the Consumer Protection Act, 1986, the said Act is a social benefit oriented legislation, which encourages adoption of liberal construction in favour of the consumer. The intention of the legislation was to protect consumers and enable them to participate directly in the market economy.

(2) The Bench further referred to the definitions of ‘consumer’, ‘person’ and ‘service’ as follows and has observed that the term ‘consumer’:

i) The term ‘consumer’ is defined as follows under Section 2 (1) (d) of the 1986 Act:

(d) “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 payments, when such services are availed of with the approval of the first-mentioned person;

Explanation: For the purposes of sub-clause (i), “commercial purpose” does not include use by a consumer of goods bought and used by him exclusively for the purpose of earning his livelihood, by means of self-employment;

ii) Thus, the aforesaid definition of ‘consumer’ does not exclude from its ambit, a commercial enterprise or a firm or any other ‘person’ as defined in Section 2 (1) (m) of the 1986 Act. The Bench held as follows:

“Thus, what is culled out is that there is no such exclusion from the definition of the term “consumer” either to a commercial enterprise or to a person who is covered under the expression “person” defined in Section 2(1)(m) of the Act, 1986 merely because it is a commercial enterprise. To the contrary, a firm whether registered or not is a person who can always invoke the jurisdiction of the Act, 1986 provided it falls within the scope and ambit of the expression “consumer” as defined under Section 2(1)(d) of the CPA.”

3) The Bench further observed that what is of utmost importance is to determine the nature of transaction in relation to which the complaint has been filed under the Act i.e. whether such a transaction has any nexus with profit generating activity or not.

4) Thus, applying the aforesaid principle to the present case, the Supreme Court held as follows:

“It can be concluded that in the 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 be open to be examined on the facts of each case, as to the transaction in reference to which the claim has been raised has any close and direct nexus with profit generating activity. We do not agree with the submission made on behalf of the appellant that if insurance claims are covered under the Act, 1986, then virtually all insurance matters will come within the purview of the Act, 1986 and this will render the Act, 2015 nugatory. In our view, both these Acts have different scope and ambit and have different remedial mechanism, are in different sphere having no internal co­relationship.”

5) That the Apex Court held that in cases where consumer complaints have been filed by commercial enterprises / firms in respect of goods purchased by them, the Courts have to determine whether the goods were purchased for resale or for commercial purpose or whether the services were availed for any commercial purpose and if the answer to the above is in affirmative, then the insured would not qualify as a ‘consumer’ under the Act.


Thus, based on the aforesaid observations, the Supreme Court held that the State Commission shall decide the issue (i) whether the goods purchased by the Respondents in the present case were for resale or commercial purpose and (ii) accordingly, decide whether the Respondents can be qualified as ‘consumer’ under the Act and that the Complaints are maintainable or not. Hence, the matter was sent back to the the State Commission with directions to adjudicate the Complaints expeditiously and no later than a period of one year. As a result, the Supreme Court dismissed the Appeals filed by the Appellant-Insurer and thereby, set aside the NCDRC Orders.

Devashish Kakkar

Legal Associate

The Indian Lawyer

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