Summary
| Category | Data |
|---|---|
| Court | Supreme Court of India |
| Case Number | C.A. No.-006349-006349 – 2024 |
| Diary Number | 24888/2020 |
| Judge Name | HON’BLE MR. JUSTICE MANOJ MISRA |
| Bench |
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| Precedent Value | Binding authority on interpretation of “commercial purpose” under CPA 1986 |
| Overrules / Affirms | Affirms State Commission and NCDRC: purchase was for a commercial purpose, appellant not a “consumer” |
| Type of Law | Consumer Protection Act, 1986 |
| Questions of Law |
Whether procurement of enterprise software by a company for automating its export/import processes, directly linked to profit generation, is a “commercial purpose” under Section 2(1)(d), thus excluding it from “consumer” status? |
| Ratio Decidendi |
The Court held that under Section 2(1)(d) CPR 1986, a transaction is excluded from “consumer” status if the dominant purpose is profit generation. While the self-employment exception covers individuals using goods/services to earn a livelihood, it does not extend to corporate entities automating business processes. The dominant-purpose test from Lilavati Kirtilal Mehta applies: identity of the buyer and transaction value are secondary to whether there is a direct nexus with profit generation. Corporate procurement of business-automation software is therefore not a “consumer” transaction. |
| Judgments Relied Upon |
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| Logic / Jurisprudence / Authorities Relied Upon by the Court |
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| Facts as Summarised by the Court |
A company engaged in import/export bought a software license (“Brillio Opti Suite”) to implement an export/import documentation system. Despite payment, the software malfunctioned. It sued for deficiency of service before the State Commission, which held it non-maintainable since the purchase was for commercial purpose. NCDRC affirmed. The appeal questioned its “consumer” status. |
Practical Impact
| Category | Impact |
|---|---|
| Binding On | All consumer fora and subordinate courts interpreting Section 2(1)(d) CPA 1986 |
| Persuasive For | High Courts on “commercial purpose” analysis; industry counsel in B2B software disputes |
| Distinguishes |
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| Follows |
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What’s New / What Lawyers Should Note
- Clarifies that procurement of enterprise-automation software by an established company to optimize and cut costs is a commercial-purpose transaction, excluding it from “consumer” status.
- Reaffirms the dominant-purpose test: direct nexus with profit generation, not buyer identity or transaction value, decides “commercial purpose.”
- Confirms that the self-employment exception under the Explanation to Section 2(1)(d) does not extend to corporate entities.
- Emphasizes need for practitioners to scrutinize the profit-nexus when drafting consumer-dispute strategies in B2B tech procurement.
Summary of Legal Reasoning
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Statutory Definitions
- Section 2(1)(d) CPA 1986 defines “consumer” but excludes goods/services for any “commercial purpose.”
- Explanation excludes from “commercial purpose” only self-employment by individuals.
- Section 2(1)(m) extends “person” to include companies.
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Dominant-Purpose Test
- Per Lilavati Kirtilal Mehta: enquiry is whether the purchase has a close and direct nexus with profit-generating activity.
- Identity or value of transaction is not conclusive; what matters is the dominant intention.
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Corporate vs. Individual
- Investment in automation software by a company inherently aims to maximize efficiency and profits.
- Unlike self-employed individuals using tools to earn a livelihood, corporate profit motive excludes “consumer” status.
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Precedent Application
- Distinguished Sunil Kohli (unemployed individuals booking premises for future self-employment) and Paramount (unemployed graduates).
- Followed Harsolia Motors: profit-nexus test.
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Conclusion
- Both State Commission and NCDRC rightly held the purchase was for a commercial purpose; appellant is not a “consumer” under Section 2(1)(d).
Arguments by the Parties
Petitioner (Appellant Company)
- Purchased the software for end-use, not for resale or transfer.
- No direct profit-generation nexus; used exclusively for internal implementation.
- The Explanation to Section 2(1)(d) should apply since it was for self-utilization.
Respondent (Software Provider)
- Software functions (export documentation, tracking, duty drawback, etc.) serve the appellant’s profit-generating business.
- Treating such B2B transactions as consumer disputes undermines the purpose of CPA 1986.
- Relied on Lilavati Mehta, Harsolia Motors, Shrikant Mantri to show corporate software purchase is commercial.
Factual Background
A company dealing in import/export of medical devices purchased the “Brillio Opti Suite” software license to automate its documentation and tracking processes. After paying for both license and custom development, the software failed to function as promised, prompting a deficiency-of-service complaint before the State Commission. Both the State Commission and NCDRC held the complaint non-maintainable, finding the purchase was a “commercial purpose” and the company thus not a “consumer.” The Supreme Court addressed whether Section 2(1)(d) CPA 1986 excluded the appellant.
Statutory Analysis
- Section 2(1)(d), CPA 1986: Defines “consumer” and excludes those obtaining goods/services “for any commercial purpose.”
- Explanation: Carves out self-employment by individuals but makes no provision for companies.
- Section 2(1)(m): “Person” includes firms and companies, confirming corporate entities are capable of “consumer” status if not for commercial purpose.
- Court applied statutory text alongside judicial gloss (Lilavati, Harsolia Motors) to interpret “commercial purpose” in the corporate-software-procurement context.
Dissenting / Concurring Opinion Summary
No separate dissenting or concurring opinions were recorded; the judgment was delivered unanimously by a two-judge bench.
Procedural Innovations
No new procedural rules or guidelines were issued; the decision applies existing jurisprudence to the facts.
Alert Indicators
- ✔ Precedent Followed