REPORTABLE

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

CIVIL APPEAL NO. 12322 OF 2016

Lilavati Kirtilal Mehta Medical Trust …Appellant

Versus

M/S Unique Shanti Developers & Ors. …

Respondents

J U D G M E N T

MOHAN M. SHANTANAGOUDAR, J.

1. This appeal arises out of judgment of the National Consumer

Disputes  Redressal  Commission  (‘National  Commission’)  dated

25.10.2016  dismissing  the  Appellant’s  Review  Application  No.

76/2016 against the order dated 1.3.2016 by which the National

Commission dismissed the Appellant’s Consumer Complaint No.

117/2016.  

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2. The Appellant’s case is that Respondent No. 1/Opposite Party

No. 1 had developed two buildings ‘Madhuvan’ with thirty two ‘1

BHK’ flats in colony ‘Shanti Park’ in Thane, Maharashtra. Out of

these the Appellant/complainant trust took possession of 29 flats

for  provision of  hostel  facilities  to  nurses  employed by Lilavati

Hospital, which is run by the Appellant trust. 29 agreements to

sell were executed in respect of each flat on 25.11.1995, which

were registered on 16.3.1996, and entire consideration amount

was paid for the same. The architect issued completion certificate

in respect of the flats on 17.2.1997. The flats were used for the

purpose of hostel facilities till 2002. However, within 2-3 years of

completion  of  the  project,  because  of  alleged  poor  building

quality, the structure became dilapidated. The appellant vacated

the flats in 2002 and since 2004, the flats are lying unused.  

In  the  meanwhile,  an  interim  Board  of  Trustees  was

constituted by this  Court  by order  dated 21.5.2014 in  SLP No.

3772/2014, which is a separate litigation concerning dispute over

control of the appellant trust between different groups of trustees.

The aforesaid  interim Board  of  Trustees  called  for  a  structural

report from M/s Raje Consultants, which submitted their report in

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September 2015 finding that the cost of repairs would be more

than the cost  of  reconstruction.  The appellant  also claims that

Respondent No. 1 obtained the occupation certificate for the flats

by playing fraud upon the local municipal corporation. Hence the

appellant  filed  Consumer  Complaint  No.  117/2016  before  the

National Commission claiming Rs 7,65,95,400/- in compensation

on account  of  annual  loss  of  rent  from 2002 to  2015,  cost  of

reconstruction of building ‘Madhuvan’ and future loss of rent of

Rs 35,00,000/- per year, along with Rs 5,00,000/- in damages.  

Initially,  the National Commission by order dated 1.3.2016

dismissed the complaint  as barred by limitation on the ground

that cause of action for raising the complaint arose in 2004, the

year  since  when  the  flats  are  lying  unused;  however  the

complaint was filed in 2016. Under Section 24A of the Consumer

Protection Act, 1986 (‘1986 Act’) the period of limitation for filing

a complaint is two years, hence the complaint was time-barred.

The National Commission further held that the pending litigation

between  the  trustees  in  SLP  No.  3772/2014  (supra)  is  not

sufficient  to  explain  the  delay  as  the  dispute  concerning

constitution of Board of Trustees of the appellant trust arose in

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2014 whereas it was not the appellant’s case that there was no

competent Board of Trustees in 2004 when the cause of action

arose.  

Subsequently  the  National  Commission  in  the  impugned

judgment, hearing Review Application No. 76 of 2016 against the

order  dated  1.3.2016  (supra),  found  that  it  had  incorrectly

recorded in the aforesaid order that ‘conveyance deeds’ of the 29

flats were registered on 16.3.1996, whereas what was registered

by  the  appellants  was  actually  agreements  to  sell.  Hence  on

account  of  this  error  on  the  face  of  the  record,  the  National

Commission  recalled  the  order  dated  1.3.2016.  However  the

National Commission again proceeded to dismiss the complaint,

this  time  on  the  ground  that  the  appellant  trust  was  not  a

‘consumer’ within the meaning of Section 2(1)(d) of the 1986 Act

as the aforesaid section excludes a person who obtains goods and

services for a ‘commercial purpose’; that since providing hostel

facility  to  the  nurses  is  directly  connected  to  the  commercial

purpose of running the hospital, and is consideration for the work

done  by  them  in  the  hospital,  the  appellant  would  not  be  a

‘consumer’ under the 1986 Act. Hence this appeal.  

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3. Section  2(1)(d)  of  the  1986  Act  defines  ‘consumer’  as

follows:

“(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 prom- ised, 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 but does not  include  a  person  who avails  of  such  services  for  any commercial purposes.

Explanation.— For the purposes of this clause, “commercial purpose” does not include use by a person of goods bought and used by him and services availed by him exclusively for the  purposes  of  earning  his  livelihood  by  means  of  self- employment.”  

(emphasis supplied)

The above Explanation clause was added to Section 2(1)(d)

by way of Ordinance No. 24 of 1993 (subsequently replaced by

Amendment  Act  No.  50  of  1993),  with  effect  from 18.6.1993.

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Amendment Act No. 50 of 1993 also added ‘housing construction’

to the definition of ‘service’ under Section 2(o) of the 1986 Act.  

In the present case, it is not denied that the Appellant has

validly taken possession of the flats constructed by Respondent

No. 1 and paid consideration for the same, and can therefore be

said  to  have  availed  of  its  housing  construction  services.  This

Court  has  held  in  Spring  Meadows  Hospital  v.  Harjol

Ahluwalia through K.S. Ahluwalia, I (1998) CPJ 1 (SC), that the

person  who  hires  the  service  for  a  beneficiary  can  also  be

included in the definition of ‘consumer’ under Section 2(1)(d)(ii).

Though that case was in the context of parents hiring the services

of a hospital for their minor child, the same principle may also be

extended to a case such as the present one where an employer

such as the Appellant trust hires certain services for the welfare

of  its  employees.  Hence,  though  possession  of  the  flats  was

acquired  for  the  purpose  of  providing  housing  facility  to  the

hospital  nurses,  the  Appellant  is  entitled  to  claim  against

Respondent No. 1 as a consumer.  

The only issue which arises for our consideration therefore is

whether  the  purchase  of  flats  for  the  purpose  of  providing

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accommodation  to  nurses  employed  by  the  Appellant  trust’s

hospital  qualifies  as  a  ‘purchase  of  services  for  a  commercial

purpose’;  and  consequently  whether  the  Appellant  is  excluded

from the  definition  of  ‘consumer’  under  Section  2(1)(d)  of  the

1986 Act?

Learned senior counsel for the Appellant, Mr. Guru Krishna

Kumar argued in reliance upon this Court’s decisions in  Laxmi

Engineering Works  v. P.S.G. Industrial  Institute,  (1995) 3

SCC 583,  and  Paramount Digital  Colour Lab  v. Agfa India

Private Limited, (2018) 14 SCC 81, that the Court has to look at

the dominant purpose for which the purchase is made in order to

decide whether it was for a ‘commercial purpose.’  In this case,

the  dominant  purpose  for  purchasing  the  flats  was  to  provide

housing  to  the  nurses  and  was  not  linked  to  the  commercial

operations of the hospital.  

Per contra, learned senior counsel for the Respondents Ms.

Kiran Suri argued that under the Explanation to Section 2(1)(d),

only goods and services availed “exclusively for the purpose of

earning  livelihood  by  self-employment”  are  excluded  from  the

ambit  of ‘commercial  purpose’.  In  the present case,  the hostel

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facilities in the flats constructed by Respondent No. 1 were for the

purpose of providing comfortable accommodation to the nurses,

which in turn would increase their efficiency and lead to provision

of better services to the hospital. Hence the flats were indirectly

connected to the commercial purpose of increasing profits for the

hospital.  Such  a  purchase  would  not  fall  in  the  category  of

‘earning livelihood by self-employment’.  Learned senior counsel

relied on this Court’s decisions in  Laxmi Engineering (supra),

Cheema Engineering Services v. Rajan Singh, (1997) 1 SCC

131,  and  Kalpavruksha  Charitable  Trust  v. Toshniwal

Brothers (Bombay) Pvt. Ltd., (2000) 1 SCC 512, to buttress

her argument.  

4. Taking into account the material on record and the relevant

jurisprudence on this issue, we are of the considered opinion that

the purchase of flats by the Appellant for the purpose of providing

hostel facilities to the hospital nurses does not qualify as meant

for  a  ‘commercial  purpose’.  Though  the  term  ‘commercial

purpose’ as referred to under Section 2(1)(d) has nowhere been

defined  under  the  provisions  of  the  1986  Act,  this  Court  has

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expounded  upon  it  based  on  its  lateral  dictionary  meaning  in

various decisions.

In  Laxmi Engineering (supra), which is one of the leading

authorities  on  this  point,  a  two-Judge  Bench  of  this  Court

elucidated upon the meaning of ‘commercial purpose’ as follows:

“10. A review of the provisions of the Act discloses that the  quasi-judicial  bodies/authorities/agencies  created by  the  Act  known  as  District  Forums,  State Commissions  and  the  National  Commission  are  not courts though invested with some of the powers of a civil court. They are quasi-judicial tribunals brought into existence to render inexpensive and speedy remedies to consumers…The idea was to help the consumers get justice and fair treatment in the matter of goods and services purchased and availed by them in a market dominated by large trading and manufacturing bodies. Indeed, the entire Act revolves round the consumer and is designed to protect his interest. The Act provides for "business-to-consumer' disputes and not for "business- to-business" disputes. This  scheme of  the Act,  in  our opinion,  is  relevant  to  and  helps  in  interpreting  the words that fall for consideration in this appeal.

11.  Controversy has,  however,  arisen with respect  to meaning of the expression “commercial purpose”.  It is also  not  defined  in  the  Act.  In  the  absence  of  a definition,  we  have  to  go  by  its  ordinary  meaning. “Commercial”  denotes  “pertaining  to  commerce” (Chamber's  Twentieth  Century  Dictionary);  it  means “connected with, or engaged in commerce; mercantile; having  profit  as  the  main  aim”  (Collins  English Dictionary)  whereas  the  word  “commerce"  means "financial transactions especially buying and selling of merchandise,  on  a  large  scale"  (Concise  Oxford

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Dictionary). The National Commission appears to have been  taking  a  consistent  view  that  where  a  person purchases goods “with a view to using such goods for carrying on any activity on a large scale for the purpose of earning profit” he will not be a "consumer" within the meaning of Section 2(d)(i) of the Act…

…The  explanation  reduces  the  question,  what  is  a “commercial  purpose”,  to  a  question  of  fact  to  be decided in the facts of each case. It is not the value of the goods that matters but the purpose to which the goods bought are put to. The several words employed in  the  explanation,  viz.,  “uses  them  by  himself”, “exclusively for the purpose of earning his livelihood” and “by means of self-employment” make the intention of Parliament abundantly clear, that the goods bought must  be  used  by  the  buyer  himself,  by  employing himself for earning his livelihood.”  

(emphasis supplied)

In  the  aforementioned  discussion  in  Laxmi  Engineering,  this

Court relied upon Synco Textiles Pvt. Ltd. v. Greaves Cotton

and Company Limited, (1991) 1 CPJ 499. In Synco Textiles, a

4  Member-Bench  of  the  National  Commission  headed  by  V.

Balakrishna Eradi  J.,  expounded upon the meaning of the term

‘commercial  purpose’,  prior  to  the  insertion  of  the  Explanation

clause to Section 2(1)(d) of the 1986 Act:

“3…The words “for any commercial purpose” are wide enough to take in all cases where goods are purchased for  being  used  in  any  activity  directly  intended to generate profit…

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4. Going by the plain dictionary meaning of the words used  in  the  definition  section  the  intention  of Parliament must be understood to be to exclude from the scope of the expression 'consumer' any person who buys goods for the purpose of their being used in any activity  engaged on a large scale  for  the purpose of making profit. It is obvious that Parliament intended to restrict the benefits of the Act to ordinary consumers purchasing goods either for their own consumption or even for  use in  some small  venture which they may have  embarked  upon  in  order  to  make  a  living  as distinct  from large scale manufacturing or  processing activity  carried  on  for  profit.  In  order  that  exclusion clause should apply it is however necessary that there should  be  a  close  nexus  between  the  transaction  of purchase of goods and the large scale activity carried on for earning profit.

6.  There  is  a  close  and  direct  nexus  between  the purpose  of  purchase  of  the  generating  sets  and  the commercial activity of manufacturing of edible oils for trade carried on by the appellant company, since the generating sets were intended to be used, as and when the  need  arose,  for  generating  electric  current  for manufacture of edible oils for the purpose of trade. We do not, therefore, find any reason to interfere with the view taken by the State Commission that the appellant is not a ‘consumer’.”

Recently, a two-Judge bench of this Court, comprising of one of

us,  in  Paramount  Digital  Colour  Lab (supra)  has  re-

emphasized  the  importance  of  there  being  a  ‘close  nexus’

between the purpose for which the good or service is availed of

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and  a  large-scale  profit  activity  in  order  to  classify  such  a

transaction as commercial in nature, as illustrated below:

“12…It  is  therefore  clear,  that  despite  “commercial activity”,  whether  a  person  would  fall  within  the definition of “consumer” or not would be a question of fact in every case. Such question of fact ought to be decided in the facts and circumstances of each case.

17. Since there is nothing on record to show that they wanted the machine to be installed for a commercial purpose and not exclusively for the purposes of earning their  livelihood  by  means  of  self-employment,  the National  Commission  was  not  justified  in  concluding that  the  appellants  have  utilised  the  services  of  an operator or a helper to run a commercial venture. One machine does not need many operators or helpers to complete the work entrusted. Since the appellants were two partners, they must have been doing the work on their own, of course, may be with the aid of a helper or an operator. The machine would not have been used in a large-scale profit-making activity but, on the contrary, the  appellants  purchased  the  machine  for  their  own utility,  personal  handling  and  for  their  small  venture which they had embarked upon to make a livelihood. The same is distinct from large-scale manufacturing or processing activity carried on for huge profits. There is no close nexus between the transaction of purchase of the machine and the alleged large-scale activity carried on for earning profit. Since the appellants had got no employment  and  they  were  unemployed  graduates, that too without finances, it is but natural for them to raise a loan to start the business of photography on a small scale for earning their livelihood.”

Therefore  this  Court  in  Paramount  Digital  Colour  Lab

(supra)  held  that  the  purchase  of  a  machine  for  appellants’

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photography business, which was a small-scale business meant

for earning their livelihood, would not be interpreted as being for

a ‘commercial purpose.’

5. It is true that the aforementioned decisions were rendered in

the context of deciding whether the goods or services availed of

in  the  facts  of  those cases  were  for  a  commercial  purpose or

exclusively  for  the  purpose  of  self-employment.  This  does  not

mean,  however,  that  in  every  case  a  negative  test  has  to  be

adopted wherein any activity that does not fall within the ambit of

‘earning  livelihood  by  means  of  self-employment’  would

necessarily be for a commercial purpose. We reject Respondent

No. 1’s argument in this regard. The Explanation clause to Section

2(1)(d)  of  the  1986  Act  is  only  clarificatory  in  nature,  as  was

highlighted by this Court in Laxmi Engineering (supra):

“14.  Yet  another  clarification;  the  Explanation,  in  our opinion is only explanatory; it is more in the nature of a clarification a fact which would become evident if one examines the definition (minus the explanation) in the context  and  scheme  of  the  enactment.  As  indicated earlier, the explanation broadly affirms the decisions of the National Commission. It merely makes explicit what was implicit in the Act. It is not as if the law is changed by  the  said  explanation;  it  has  been  merely  made clearer.”

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Therefore  the  Explanation  clause  only  re-affirms  the

definition of ‘consumer’ as it already exists. Ultimately, whether

or not a person is a consumer or whether an activity is meant for

a  commercial  purpose  will  depend  upon  the  facts  and

circumstances of each case. It may be the case that a person who

engages in commercial activities has purchased a good or availed

of a service for their personal use and consumption, or for the

personal use of a beneficiary, and such purchase is not linked to

their ordinary profit-generating activities or for creation of self-

employment. Such a person may still claim to be a ‘consumer.’

For example, a large corporation may hire the services of a

caterer or a 5-star hotel for hosting a function for its employees

and their families. If there is any deficiency in service, the service-

provider cannot claim that merely because the person availing of

the  service  is  a  profit-generating  entity,  and  because  such

transaction  does  not  relate  to  generation  of  livelihood through

self-employment,  they  do  not  fall  under  the  definition  of  a

‘consumer.’  A  commercial  entity  may  also  be  a  consumer

depending upon the facts of the case. It is not the identity of the

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person but the purpose for which the transaction is made which is

relevant.  

6. With regard to goods and services availed of by employers

for the benefit of their employees, it is particularly important to

note  that  we  live  in  a  socialist  economy,  wherein  the  ethos

dictates that employers are obligated to make provisions for the

welfare  of  their  employees.  No  doubt,  welfare  measures

undertaken  by  employers  may  increase  workers’  health  and

efficiency, and therefore improve the employing entity’s overall

productivity. However this is a duty to be shared by all employer

organisations  and  not  merely  those  looking  to  increase  their

productivity/profits.  This  obligation  exists  irrespective  of  how

much  profit  or  turnover  the  organization  generates  in  a  year,

though the degree to which it extends may differ depending upon

the financial capacity of the employer.  

Hence private corporate bodies such as the Appellant trust

may  engage  the  services  of  third  parties  for  the  purpose  of

providing  perquisites  to  their  employees.  For  example,  an

employer may book flight tickets or train tickets for an employee

so as to facilitate their travel in the ordinary course of business. If

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any negligence occurs resulting in injury to the employee or their

property, the airline/railway company cannot disclaim liability on

the ground that  the activity  was carried out  for  a  ‘commercial

purpose’.  

As  discussed  earlier,  if  in  all  such  cases  the  third  party

service-provider disclaims liability before consumer forums on the

ground  that  the  hirer  of  the  service  is  engaged  in  trade  and

commerce, it will open a Pandora’s box wherein the employer as

well  as  the  employees  will  not  have  any  remedy.  This  would

defeat the object of providing a speedy remedy to consumers, as

outlined in the provisions of the 1986 Act. Further, setting such a

precedent  may  discourage  employers  from  undertaking  to

provide any facilities for their employees. Hence, it is necessary

to clarify that the provision of such services would not usually be

included in the definition of ‘commercial purpose.’

7. To summarize from the above discussion, though a straight-

jacket  formula  cannot  be adopted in  every case,  the following

broad principles  can be culled out  for  determining whether  an

activity or transaction is ‘for a commercial purpose’:

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(i)  The  question  of  whether  a  transaction  is  for  a  commercial

purpose would depend upon the facts and circumstances of each

case. However,  ordinarily, ‘commercial purpose’ is understood to

include manufacturing/industrial  activity  or  business-to-business

transactions between commercial entities.

(ii) The purchase of the good or service should have a close and

direct nexus with a profit-generating activity.  

(iii) The identity of the person making the purchase or the value

of the transaction is not conclusive to the question of whether it is

for a commercial purpose. It has to be seen whether the dominant

intention or dominant purpose for the transaction was to facilitate

some  kind  of  profit  generation  for  the  purchaser  and/or  their

beneficiary.  

(iv) If it is found that the dominant purpose behind purchasing the

good or service was for the personal use and consumption of the

purchaser and/or their beneficiary, or is otherwise not linked to

any commercial activity, the question of whether such a purchase

was for the purpose of ‘generating livelihood by means of self-

employment’ need not be looked into.  

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8. Applying these principles to the facts of the present case, we

find that there is no direct nexus between the purchase of flats by

the Appellant trust and its profit generating activities. The flats

were  not  occupied  for  undertaking  any  medical/diagnostic

facilities  within  the hospital  but  for  accommodating the nurses

employed  by  the  hospital.  Moreover,  the  flats  were  being

provided  to  the  nurses  without  any  rent.  It  is  not  the

Respondents’ case that the Appellant was generating any surplus

from occupying the flats or engaging in buying and selling of flats.

It  may  be  the  case  that  provision  of  comfortable  hostel

facilities  to  the  nurses,  generates  a  feeling  of  gratitude  and

loyalty  towards  their  employer  and  improves  their  overall

efficiency,  which indirectly  results  in  the hospital  gaining more

repute and therefore generating more income. However, this is a

matter of conjecture and there is no direct causal chain which can

be  drawn  between  provision  of  accommodation  to  hospital

employees and increase in the Appellant’s profits.  

The decision  in  Kalpavruksha Charitable Trust (supra),

relied upon by the Respondents, does not support them inasmuch

as it was on a different set of facts. In that case, this Court held

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that the purchase of CT scan machines by a diagnostic centre

would be included within the meaning of ‘commercial purpose’.

There is an apparent direct nexus between the purchase of the

machines,  medical  equipment,  etc.  and  the  running  of  a

diagnostic centre/hospital. The present case does not involve any

such purchase.  

Further,  applying the dominant purpose test,  it  cannot be

said that the provision of such hostel facilities is integral to the

Appellant trust’s commercial activities. The paramount object of

providing such facilities is  to cater to the needs of nurses and

combat  the  challenges  faced  by  those  who  lack  permanent

accommodation in the city, so as to recompense the nurses for

the pivotal role which they play as co-ordinators and custodians of

patients’ care.  

Nurses help in the speedy recovery of patients and are a

vital resource for hospitals and medical centres inasmuch as they

are  the  only  resource  available  24/7  for  catering  to  patients’

needs. They are directly involved in all aspects of hospital service

quality, be it in the form of monitoring patients’ recovery, bedside

medication management or assistance with surgeries and other

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major  operations.  In  some  situations  they  are  responsible  for

performing  immediate  interventions  to  prevent  medical

complications.  They  are  on  the  frontlines  of  administering  and

evaluating treatment, and provide invaluable emotional support

as  they  are  best  placed  to  understand  the  complexities  and

implications of having a serious illness.  

Hence the provision of  hostel  facilities  to  nurses so as to

facilitate better medical care is a positive duty enjoined upon the

hospital so as to maintain the beneficial effects of the curative

care efforts undertaken by it. Such a duty exists irrespective of

the surplus or turnover generated by the hospital, and hence is

not even remotely related to the object of earning profits or for

any commercial use as envisaged under Section 2(1)(d).

9. Hence we find that the Appellant trust is a ‘consumer’ under

Section 2(1)(d) of the 1986 Act for the present transaction under

consideration.  In  light  of  the  above  discussion,  we  consider  it

appropriate to remand the matter to the National Commission for

consideration in accordance with law. The appeal is allowed and

restored  before  the  National  Commission,  and  the  impugned

judgment  is  set  aside,  in  the  aforesaid  terms.  The parties  are

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relegated  to  record  their  evidence  before  the  National

Commission, and the National Commission is requested to hear

the matter on merits and decide the same expeditiously, at an

early date.  

...........................................J. (Mohan M. Shantanagoudar)

...........................................J. (Ajay Rastogi)

New Delhi; November 14, 2019.

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