While goods purchased or services availed for “commercial purpose” are excluded from the purview of the Consumer Protection Act, the term is not defined clearly hence the confusion about its interpretation. In a landmark ruling, the National Commission has clarified the legal position.
Case Study: A partnership firm called Classique, having its office in Goa, had booked a flat in Royal Palms in Mumbai. The flat admeasuring 1244 sqft was to be sold for Rs 61 lakh. Possession was to be given within two years.
The firm paid Rs 40,09,414 in installments and another Rs 1,51,000 toward allotment of parking. But the builder failed to execute the agreement. The builder also did not obtain the occupancy certificate nor gave the possession. So the firm filed a complaint before the Maharashtra State Commission, seeking a direction to the builder to execute the agreement, hand over possession, and pay compensation for mental agony and loss of rent at Rs 20,000 per month.
The builder contested the case. It was contended that the complaint was not maintainable as it was a commercial transaction where the firm had booked the flat as an investment, so it cannot be considred a consumer.
The state commission observed that the claim for loss of rent established that the purchase was an investment for earning rent. The commission refused to accept the firm’s argument that the flat was meant for its partners. The complaint was dismissed.
Aggrieved, the firm challenged this order before the National Commission. In appeal it was observed that the complaint did refer to the flat being purchased as an investment, but there was nothing to show that the firm was engaged in the business of purchase and sale of flats. A mere averment that rent could have been earned cannot lead to an inference that the firm is engaged in real estate business.
Accordingly, by its order of April 18, the National Commission remanded it back to the state commission with a direction to decide the claim on merits. It also restrained the builder from creating any third party interest in the flat till the dispute was adjudicated by the state commission.
Impact: The interpretation here shows that commercial purpose would mean buying and selling or trading activity. So, a partnership firm or company which buys a flat would be a consumer if it is not involved in real estate business.
WRITTEN BY – JEHANGIR GAI
(The author is a consumer activist and has won the Govt. of India’s National Youth Award for Consumer Protection. His email is firstname.lastname@example.org)