Supreme Court Clarifies ‘Body Corporate’ and ‘Commercial Purpose’ Definitions under Consumer Protection Act

The Supreme Court issued a new ruling on March 23, 2024, delineating “commercial purpose” concerning a corporate entity, affirming that complaints remain admissible under the Consumer Protection Act of 1986, even if the term “Body Corporate” wasn’t explicitly included in the original legislation.

Dr Prem Lata, Legal Head VOICE

The case in hand is M/S Koziflex Matter Pvt Ltd vs SBI General insurance co. Ltd & others.

There are two important points discussed in the case-

  1. Company is not a ‘person’ as defined under the Act of 1986.
  2. Company indulged in commercial purpose, hence is not a consumer.

Regarding the first matter, the Supreme Court determined that a company qualifies as a “person” under the previous act, even if the term “body corporate” wasn’t explicitly mentioned. In numerous cases, the SC has previously established that a corporation, as an artificial entity, is represented by its leadership when it meets other consumer criteria. The SC clarifies that the inclusion of the term “body corporate” is intended to address questions about its right to file consumer complaints and enhance clarity, but its absence doesn’t alter the essence of both acts.

The Supreme Court also disagrees with the notion that a company’s purchase of insurance constitutes a commercial purpose, especially in insurance-related cases. It is now a well-established principle that insurance, whether acquired by an individual or a company, serves the purpose of indemnifying loss, not for resale or profit generation.

In the mentioned case, the company had opted for a ‘standard perils policy’ (material damage). The Supreme Court, in an appeal, resolved a similar issue.

On April 13, 2023, the Supreme Court decided in the case of National Insurance Co. Ltd. vs. Harsolia Motors and Ors. that a commercial enterprise can file a consumer dispute over goods or services not related to profit-making activities. This decision echoes a precedent set on December 3, 2004, by the National Commission, which clarified for the first time that purchasing insurance constitutes a service. Furthermore, it established that industrial entities are entitled to challenge an insurance company if it fails to cover a loss.

The Court emphasized the critical nature of the transaction that prompts a complaint under the Consumer Protection Act, 1986, where the claim is to be recognized as a ‘consumer’. It stated, “…no exclusion exists within the ‘consumer’ definition that applies to either a commercial enterprise or to any individual covered under the Act.” Additionally, in the case of Lilavati Kirtilal Mehta Medical Trust v. Unique Shanti Developers and Others, the court made a ruling that further clarifies this interpretation.

“Such a purchase may claim to be a consumer. Particularly, the bench referred to the 2019 judgment which held that provision of hostels for nurses by a hostel won’t be a commercial activity within the meaning of the Consumer Protection Act.”

Enquire Now

    Enquire Now