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2016 (7) TMI 1700 - Commission - Indian LawsInterpretation of statute - Section 2(1)(d) of the Consumer Protection Act - Whether the purchase of a car or any other goods by a company for the use/personal use of its Director amounts to purchase for a commercial purpose, within the meaning of Section 2(1)(d) of the Consumer Protection Act, or not? - HELD THAT - Going by the dictionary meaning, a car or for that matter any goods obtained and the services hired or availed by a company can be said to have been obtained or hired or availed for a commercial purpose, only if the said goods or services are intrinsically connected with, or related to the business or commerce in which the company is engaged. The acquisition of the goods or the hiring or availing of services, in order to bring the transaction within the purview of section 2 (1) (d) of the Consumer Protection Act, therefore, should be aimed at generating profits for the company or should otherwise be connected or interwoven with the business activities of the company. The purpose behind such acquisition should be to promote, advance or augment the business activities of the company, by the use of such goods or services. As observed by the Hon'ble Supreme Court in Laxmi Engineering Works 1995 (4) TMI 294 - SUPREME COURT , it is not the value of the goods but the purpose for which the goods are brought or put to use, which is relevant to decide whether the goods were obtained for a commercial purpose or not. The same would be the position, where services are hired or availed by a company. If the business activities of a company cannot be conveniently undertaken without the goods purchased or the services hired or availed by a company, such purchase or hiring/availing as the case may be, would be for a commercial purpose, because the objective behind such purchase of goods or hiring or availing of the services would be to enable the company to earn profits by undertaking and advancing its business activities. If a car or other goods are purchased or the services are hired or availed by a company for the personal use of its directors or employees, the purpose behind such acquisition is not to earn profits or to advance the business activities of the company. The purpose is to make certain facilities and amenities available to the directors and employees of the company as a part of the incentive offered to them by the company, as a reward or remuneration for the work which they are expected to perform for the company. It is not as if a company cannot run its business without providing such facilities and amenities to its directors and employees - The company does not earn profit merely by making a car or certain other goods or services available to its directors and employees. Therefore, it would be difficult to say that such goods are purchased or the services are hired or availed by the company for a commercial purpose. The issue referred to the larger Bench is answered as follows -- (a) If a car or any other goods are obtained or any services are hired or availed by a company for the use/personal use of its directors or employees, such a transaction does not amount to purchase of goods or hiring or availing of services for a commercial purpose, irrespective of whether the goods or services are used solely for the personal purposes of the directors or employees of the company or they are used primarily for the use of the directors or employees of the company and incidentally for the purposes of the company. (b) The purchase of a car or any other goods or hiring or availing of services by a company for the purposes of the company amount to purchase for a commercial purpose, even if such a car or other goods or such services are incidentally used by the directors or employees of the company for their personal purposes.
Issues Involved:
1. Whether the purchase of a car or any other goods by a company for the use/personal use of its Director amounts to purchase for a commercial purpose within the meaning of Section 2(1)(d) of the Consumer Protection Act. Issue-wise Detailed Analysis: 1. Conflict in Previous Decisions: - The judgment begins by noting an apparent conflict in the decisions rendered by the Commission in "Controls and Switchgear Company Ltd. v. Daimler Chrysler India Pvt. Ltd." and "General Motors Pvt. Ltd. v. G.S. Fertilizers Pvt. Ltd." - In "Controls and Switchgear Company Ltd.," the Commission held that cars purchased by a company for the use of its directors were not for a commercial purpose because the cars were for personal use and not directly connected with earning profit. - Conversely, in "General Motors Pvt. Ltd.," the Commission held that a car purchased by a company for the use of its Managing Director amounted to a purchase for a commercial purpose, as it was considered a perk of the office and not for self-employment to earn a livelihood. 2. Definition of 'Consumer' under Section 2(1)(d) of the Consumer Protection Act: - The term 'consumer' excludes persons who obtain goods for resale or for any commercial purpose. - The emphasis is on the purpose for which the goods are obtained, and the actual use of the goods helps in deciding the purpose. 3. Interpretation of 'Commercial Purpose': - The term 'commercial purpose' is not defined in the Act and must be understood in its ordinary meaning. - 'Commercial' denotes activities connected with commerce, having profit as the main aim. - Goods or services obtained by a company are for a commercial purpose if they are intrinsically connected with the business or commerce in which the company is engaged. 4. Purpose Behind Acquisition: - The acquisition of goods or services by a company should aim at generating profits or be connected with business activities to be considered for a commercial purpose. - Goods or services obtained for the personal use of directors or employees are not aimed at earning profits but are incentives or amenities provided by the company. 5. Classification of Goods and Services: - Goods and services made available by a company to its directors or employees can be classified into three categories: a. Goods/services used only for personal purposes, unconnected with the business. b. Goods/services used primarily for personal purposes but incidentally for company purposes. c. Goods/services used primarily for company purposes but incidentally for personal purposes. 6. Dominant Purpose Test: - For categories (a) and (b), the dominant purpose is personal use, and such acquisitions are not for a commercial purpose. - For category (c), the dominant purpose is advancing business activities, and such acquisitions are for a commercial purpose. 7. Supreme Court Observations in Laxmi Engineering Works: - The Supreme Court emphasized that the benefits of the Act are intended for ordinary consumers and not for those engaged in large-scale profit-making activities. - There must be a close nexus between the purchase transaction and the large-scale profit-making activity for the exclusion to apply. 8. Depreciation and Commercial Purpose: - The claim of depreciation by a company on goods purchased for personal use of directors does not determine the commercial purpose. - The Commission's focus is on the purpose behind the purchase, not on the legal entitlement to claim depreciation. 9. Final Judgment: - The Commission concluded that if a car or any other goods are obtained or services are hired by a company for the personal use of its directors or employees, such a transaction does not amount to a commercial purpose. - Conversely, if the goods or services are primarily for the purposes of the company, the transaction amounts to a commercial purpose, even if incidentally used by directors or employees for personal purposes. Conclusion: - The issue referred to the larger Bench was answered by distinguishing between personal use and commercial purpose based on the dominant purpose behind the acquisition of goods or services.
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