WHETHER A COMPANY PURCHASING A COMMERCIAL SPACE IS A CONSUMER UNDER THE CONSUMER PROTECTION ACT

Recently, the National Consumer Redressal Commission, New Delhi (‘NCDRC’) in the case of Freight System (India) (P) Ltd. v. Omkar Realtors and Developers (P) Ltd., (Consumer Case No. 886/2020), vide its Judgment dated 25.01.2021 held that a company is not a ‘#consumer’ under the Consumer Protection Act, 2019 (the ‘Act 2019’), when a #company creating immovable capital assets in the form of lands and buildings, in its own name, for its #office use, as it is differently placed from a company buying a car, in its own name, solely for the purpose of #personal use of its Directors or employees.

The facts relates to the M/s Freight System (India) (P) Ltd (the “Complainant”), which has filed a Complaint against the Omkar Realtors and Developers (P) Ltd (the “the Builder Co.”) and a maintenance agency under Section 58(1) (a) of the Act, 2019 before the NCDRC.

The subject matter of the Complaint relates to the purchase of 11 units, together admeasuring 17,203 sq. ft., comprising the entire Mezzanine Floor of Summit Business Bay Andheri, by the Complainant from the Builder Co. for a total consideration of Rs. 17, 95,30,000/-.

The issue that arose in this case was whether the Complainant is a ‘consumer’ under Section 2 (7) of the Act, 2019. The NCDRC referred to the definition of consumer under the Act, 2019 to answer the same and observed that a commercial space in a commercial complex for an office of a company engaged in a business to generate profit is within the meaning of ‘commercial purpose’.

However, the Complainant contended that Complainant Co.’s office has no direct and close relation with its profit generating activities. The dominant purpose of purchasing space for its office in the business park is not linked to its commercial activity. Therefore, the Complainant Co. is a ‘consumer’ under Section 2(7) (ii) of the Act 2019.

NCDRC said that a company is included in the definition of ‘person’ contained in Section 2(31), it is not per se precluded from being ‘consumer’, provided if, for a specific purpose, it meets the requirements of ‘consumer’ as stated under Section 2(7) of the Act 2019. It further pointed out whether a company is a ‘consumer’, for a particular purpose, has principally to be determined by examining the facts of the case.

The Bench discussed an important case of Lilavati Kirtilal Mehta Medical Trust vs. Unique Shanti Developers & Ors. [IV (2019) CPJ 65 (SC)], in which the Supreme Court laid down the broad principles for determining whether an activity or transaction is for a commercial purpose and held that the purchase of the good or service should have a close and direct nexus with a profit-generating activity. It was further held in this case that the identity of the person making the purchase or the value of the transaction is not conclusive to the question of whether it is for a commercial purpose. The Supreme Court also observed that whether a transaction is for a commercial purpose would depend upon the facts and circumstances of each case.

In this view, the NCDRC observed that the issue in the present case relates to the purchase of a commercial space in a commercial complex in the company’s name as an immovable capital asset. It further said that human resource is an integral part of the operating requirements of a company it is an indispensable part of its operating requirements, without which it cannot undertake its profit-generating activity. Capital expenditure for its human resource decidedly has a ‘close and direct nexus’ with a company’s profit generating activity the ‘dominant purpose’ is decidedly linked to its commercial activity. The NCDRC Bench made the same observation in their Judgment.

Therefore, the NCDRC finally observed in respect of a company purchasing commercial space for its office in a commercial complex, is also materially different from a company indemnifying its raw materials and goods in process by taking insurance.

In such a case, to view the capital expenditure on human resource in isolation or opacity to its profit–generating activity, as to anyhow enable a company to fall in the definition of ‘consumer’, is per se illogical and incorrect as it defeats the purpose for which “but does not include a person who avails of such service for any commercial purpose.” has been specifically provided in Sub-section (ii) of Section 2(7) of the Act, 2019.

Thus, the Bench of NCDRC, vide its Judgment dated 25.01.2021 held that the Complainant Company’s case that it is a ‘consumer’, fails on its facts and on the law. The Bench further observed that anyhow allowing anyone into consumer protection forum has adverse ramifications. Hence, the Complainant Company does not succeed on the ground that it is a consumer.

Lakshmi Vishwakarma

Senior Legal Associate

The Indian Lawyer & Allied Services