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1999 DIGILAW 901 (SC)

KALPA VRUKSHA CHARITABLE TRUST v. TOSHNIW AL BROTHERS (BOMBAY) PVT. LTD.

1999-08-12

R.P.SETHI, S.SAGHIR AHMAD

body1999
1. The appellant, which is a charitable trust, had entered into an agreement with Respondent 1 on 31-10-1988 for the supply of CT scanning unit, an ultrasound machine and an autoanalyser which were to be imported from Japan. These were ultimately supplied by the respondents but the appellant alleged that the machinery supplied by Respondent 1 was defective and, therefore, the appellant filed a claim before the National Consumer Disputes Redressal Commission (for short "the Commission") under the Consumer Protection Act, 1986 (for short "the Act") on 19-3-1993 alleging "deficiency in service". The complaint was dismissed by the Commission on the ground that these machineries were purchased for a commercial purpose by the appellant and, therefore, the appellant was not a "consumer" within the meaning of Section 2(d) of the Act. 2. The Commission found that the Diagnostic Centre run by the appellant had yielded a surplus profit of Rs 7,96,559.59 during the financial year ending 31-3-1991. 3. The first contention which has been raised by learned counsel for the appellant is that the appellant being a charitable trust cannot be said to have any commercial motive as the entire income earned by it is spent on charity and, therefore, the finding recorded by the Commission that it was not a "consumer" within the meaning of the Act as it had earned profit from the use of the machinery supplied by Respondent 1, is not correct. We are not prepared to accept this contention. 4. The definition of "consumer" as set out in Section 2(d) which is reproduced below, does not contemplate what is contended by learned counsel for the appellant. Section 2(d) provides as under: "2. We are not prepared to accept this contention. 4. The definition of "consumer" as set out in Section 2(d) which is reproduced below, does not contemplate what is contended by learned counsel for the appellant. Section 2(d) provides as under: "2. (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 payment, 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." 5. Clause (i) of the definition extracted above contains an "exclusion clause". The words "but does not include a person who obtains such goods for resale or for any commercial purpose" curtail the broad scope of the definition of "consumer". If the goods were purchased for resale or for any commercial purpose, a person would not be a "consumer" in respect of those a goods. Consequently, such a person would not be entitled to approach the Commission for redress if there was any defect in the goods supplied to him or for any other "deficiency in service". 6. Learned counsel for the appellant has contended that the appellant is a registered charitable trust. Consequently, such a person would not be entitled to approach the Commission for redress if there was any defect in the goods supplied to him or for any other "deficiency in service". 6. Learned counsel for the appellant has contended that the appellant is a registered charitable trust. The objects of the Trust, inter alia, provide as under: "(a) to promote and help education, medical relief, relief of the poor, and any other object, of general public utility, no (sic) involving carrying on any activity of profit for the benefit of the society at large; (b) it is clearly understood that the Trust will not undertake any activity for profit and nothing will be done which is not considered as a public charitable object under the provisions of the Income Tax Act, 1961. " 7. It is on the basis of the objects set out above that it is contended that since the Trust had no motive to earn any profit out of its activities in setting up a Diagnostic Centre, it cannot be excluded from the scope of definition of "consumer" and could, therefore, legally maintain the petition before the Commission which, in holding otherwise, has grossly erred by dismissing the petition filed by the appellant. It is also contended that a trust cannot legally indulge in any activity which is not in accordance with the objects of the trust. Since the carrying out of any activity for profit-making was not the object of the Trust, the setting up of the Diagnostic Centre which has yielded income to the Trust, would not be an activity falling within the term "commercial activity". 8. The National Commission has recorded a finding on the basis of the evidence brought on record, including the audit report, that during the financial year ending on 31-3-1991, the Diagnostic Centre run by the Trust had yielded a profit of Rs 7,96,559.59. This figure is not challenged by the appellant who, however, contends that the Commission ha.s not taken other items, including items of expenditure, into consideration. It was pointed out that in the subsequent years the Trust had suffered losses. What is, therefore, contended is that an activity which has resulted in financial loss to the appellant cannot be treated as a "commercial activity". 9. It was pointed out that in the subsequent years the Trust had suffered losses. What is, therefore, contended is that an activity which has resulted in financial loss to the appellant cannot be treated as a "commercial activity". 9. There is nothing on record to indicate that the Trust was rendering free service to the patients at its Diagnostic Centre where these machines were installed. The Trust may have been given certain benefit under the Income Tax Act, one of which, according to the appellant itself, was that the donations made to it were exempt under Section 80-C of the Income Tax Act, 1961, but this would not be conclusive. Since the audit report indicated that the appellant had earned profit to the tune of Rs 7 lakhs in the financial year ending on 31-3-1991, its activity in running a Diagnostic Centre with the aid of the machines supplied by Respondent 1 cannot but be treated to be a commercial activity. So far as the contention that the Trust had incurred losses in subsequent years is concerned, that by itself will not make the activity a "non-commercial activity". An activity which is basically commercial in nature may either earn profit or incur loss, but incurring of a loss would not make the activity, a "non-commercial" activity. In a commercial activity, financial gain is a dominant object, but if the activity is not properly supervised or is not properly conducted, it may bring in loss instead of profit. But this would not, as pointed out above, change the nature of activity. It is another matter that the profit earned by the Trust was ultimately spent on charity, but for that too, there is no evidence on record.Even if it were so, the activity in running a Diagnostic Centre where free diagnostic aid was not provided to the patients and whatever was done was for monetary consideration, the activity would essentially remain a "commercial" activity with the result that the Trust would not be a "consumer" within the meaning set out in Section 2(d)(i) of the Act. The finding of the Commission, therefore, in this regard cannot be disturbed. 10. The finding of the Commission, therefore, in this regard cannot be disturbed. 10. It may be pointed out that the definition of consumer was amended by Ordinance 24 of 1993 with effect from 18-6-1993 and the following explanation which has already been set out earlier was added: "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." 11. The addition of the above explanation makes the definition clear that if a consumer has bought the goods for his own exclusive use for purposes of earning his livelihood by self-employment, he would not be a "consumer". That being so, the Commission was right in recording its finding that the appellant was not a "consumer" within the meaning of the Act and the claim petition filed by the appellant was not maintainable. 12. For the reasons stated above, we do not find any merit in the appeal which is dismissed. There shall be no order as to costs.