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NON-REPORTABLE

IN THE SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO. 7223 OF 2016

(ARISING OUT OF SLP(C) NO. 36918 OF 2013)

    LOURDES SOCIETY SNEHANJALI GIRLS   HOSTEL AND ANR.                         ……APPELLANTS

Vs.

M/S H & R JOHNSON (INDIA) LTD. & ORS.  ……RESPONDENTS

J U D G M E N T

V.GOPALA GOWDA, J. Leave granted.        

2. This  civil  appeal  by  special  leave  is  directed

against  the  impugned  judgment  and  order  dated

23.09.2013 passed by the National Consumer Disputes

Redressal Commission, New Delhi in Revision Petition

No. 4047 of 2006 whereby it has allowed the revision

petition filed by respondent nos. 1-4 and set aside

the order dated 12.10.2006 passed by the Gujarat State

Consumer Disputes Redressal Commission, Ahemdabad in

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Appeal No. 741 of 2006.

3. The brief facts of the case in nutshell are as

under:-

The  appellant  no.1-Lourdes  Society  Snehanjali

Girls  Hostel  is  a  society  registered  under  the

Societies Registration Act vide society registration

no.Guj/525/Surat and also a trust registered, vide its

Trust  registration  no.  F/430/Surat.  The

appellant-Society is a charitable institution running

a girls hostel at Surat for the benefit of Adiwasi

children.  On  02.02.2000,  the  appellant-Society

purchased vitrified glazed floor tiles from respondent

no.5 (since deleted from the array of parties vide

Court’s order dated 01.04.2015) who was a local agent

of respondent no.1-Company for a sum of Rs.4,69,579/-.

The said tiles, after its fixation in the premises of

the hostel, gradually developed black and white spots.

The appellant no.1 wrote several letters to respondent

no.4 i.e., Sales Executive of respondent no.1-company,

informing about the inferior and defective quality of

the tiles. Thereafter, the respondent no.5-local agent

visited the spot but failed to solve the issue.

4. An architect J.M. Vimawala was appointed by the

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appellant-Society to assess the damage caused due to

defective tiles. The architect assessed the loss to

the tune of Rs.4,27,712.37 which included price of the

tiles,  labour  charges,  octroi  and  transportation

charges.  Thereafter,  the  appellant-Society  served  a

legal  notice  dated  12.08.2002  to  the  respondents

making a demand of the said amount but no response was

shown by the respondents.

5. The said inaction on the part of the respondents

made  the  appellant-Society  to  file  a  Consumer

Complaint  No.  743  of  2002  against  the  respondents

before the District Consumer Disputes Redressal Forum

at Surat (for short “the District Forum”) for claim of

the said amount.

6. The District Forum appointed a Court Commissioner

to examine and find out the manufacturing defects in

the tiles as claimed by the appellant-Society. After

examination, the Court Commissioner submitted a report

dated 21.09.2004 stating therein that the tiles were

having manufacturing defect.

7. The District Forum vide its order dated 31.12.2005

held that the tiles supplied by the respondents had

manufacturing  defect.  The  respondents  committed  an

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unfair  trade  practice  by  supplying  such  defective

tiles.  By  holding  the  respondents  jointly  and

severally  liable,  the  District  Forum  directed  the

respondents  to  pay  to  the  appellants  a  sum  of

Rs.2,00,000/- along with interest @9% p.a. from the

date of complaint i.e., 31.10.2002 till its recovery.

The  respondent  no.1  was  directed  to  pay  the  above

amount to the appellant within a period of 30 days

from the date of order of the District Forum.

8. Being  Aggrieved,  the  respondents  filed  First

Appeal No. 741 of 2006 before Gujarat State Consumer

Dispute  Redressal  Commission,  Ahmedabad  (for  short

“the State Commission”) challenging the said order of

District Forum urging various grounds.  

9. The  State  Commission  dismissed  the  said  First

Appeal  of  the  respondents  by  its  order  dated

12.10.2006  and  confirmed  the  order  passed  by  the

District Forum.

10. Having  become  unsuccessful  before  the  State

Commission,  the  respondents  filed  Revision  Petition

No. 4047 of 2006 before the National Consumer Disputes

Redressal Commission, New Delhi (hereinafter referred

to  as  “the  National  Commission”)  questioning  the

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validity and correctness of the order passed by the

District Forum and the State Commission.

11. On 12.03.2012, the appellant-Society also made an

application  being  I.A.  No.1847  of  2013  in  Revision

Petition No. 4047 of 2006 to the National Commission

for  invoking  the  powers  under  Sections  14(d)  and

14(hb) of the Consumer Protection Act, 1986 and for

awarding sufficient amount of compensation in addition

to amount already awarded by the District Forum.

12. The  National  Commission  vide  its  order  dated

23.09.2013 reversed the findings of the District Forum

and  the  State  Commission  holding  that  the

appellant-Society has failed to establish that it is a

consumer  within the meaning of Section 2(d) of the

Consumer Protection Act, 1986.

13. In  support  of  their  case,  the  learned  counsel

appearing  on  behalf  of  both  the  parties  made  the

following submissions.  

Mr. Ashok Panigrahi, the learned counsel on behalf

of the appellant-Society contended that the National

Commission has erred in coming to the conclusion that

the  appellant-Society  is  a  commercial  establishment

and thus, not covered by the definition of the term

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‘consumer’  under  Section  2(d)  of  the  Consumer

Protection Act, 1986. It was further submitted by him

that it is unjustified on the part of the National

Commission to hold that the Memorandum of Association

and byelaws of the appellant-society which show that

it is a charitable institution and not any commercial

establishment were not filed before the District Forum

but filed at the stage of Revision before the National

Commission. It was further submitted by the learned

counsel  that  the  District  Forum  and  the  State

Commission  have  gone  through  the  registration

certificate  and  Memorandum  of  Association  of  the

appellant-Society.  

14. He further submitted that the National Commission

has erred in holding that the case M/s Kusumam Hotels

Pvt. Ltd.  v.  M/s Neycer India Ltd.1 is applicable to

the facts and circumstances of the present case.

15. It  was  further  contended  by  him  that  both  the

District Forum as well as the State Commission have

held that the appellant-Society cannot be regarded as

a  commercial  establishment.  It  is  completely

unjustified on the part of the National Commission to

1   III (1993) CPJ 333 (NC)

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hold  that  the  appellant-Society  being  a  commercial

establishment is not a consumer within the meaning of

the term ‘consumer’ under Section 2(d) of the Consumer

Protection  Act,  1986  in  complete  ignorance  of  the

Memorandum  of  Association  and  the  byelaws  of  the

appellant-Society.    

16. On the contrary, Mr. Sudhir K. Makkar, the learned

counsel on behalf of the respondents sought to justify

the  impugned  judgment  and  order  of  the  National

Commission contending that the same is based on sound

reasoning without error and therefore, the same need

not be interfered with by this Court.  

17. It is further contended by him that the District

Forum and the State Commission have erred in relying

on  the  report  dated  21.09.2004  given  by  the  Court

Commissioner as his qualification was not stated in

the report. The report was based on visual inspection.

Further, both the District Forum as well as the State

Commission  have  erred  in  not  considering  the  test

certificate produced by respondent no.1 as the same

was based on modern tile testing technology in its

laboratory. In the absence of expert evidence, it was

wrong on the part of the District Forum as well as the

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State Commission to hold that tiles had manufacturing

defect.    

18. After  hearing  the  learned  counsel  for  both  the

parties we come to the following conclusion:

The  National  Commission  has  exceeded  its

jurisdiction in exercising its revisional power under

Section 21(b) of the Consumer Protection Act, 1986 by

setting aside the concurrent finding of fact recorded

by the State Commission in First Appeal No. 741 of

2006 vide its judgment dated 12.10.2006 wherein the

finding of fact recorded by the District Forum was

affirmed.  

19. The facts of the instant case clearly reveal that

the National Commission has erred in observing that

the appellant-Society is a commercial establishment by

completely ignoring the Memorandum of Association and

byelaws  of  the  appellant-Society.  Both  the  District

Forum as well as the State Commission have rightly

held  that  the  appellant-Society  is  a  charitable

institution and not a commercial entity. The relevant

portion  of  the  order  passed  by  the  District  Forum

reads thus:

“6. ……It is not in dispute that complainants

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are  running  girls  hostel  in  the  name  of Complainant  no.1.  Commercial  purpose  is  also explained under the provisions of the Act. So far  as  activities  of  the  complainants  are concerned,  they  are  running  girls  hostel  and receive  fees  from  the  students.  The complainants  are  not  carrying  out  commercial activities. Purchase of goods namely tiles are for the purpose of their hostel and it cannot be said that tiles is subject matter of their business. Whenever any person purchases goods for carrying out business for commercial or for livelihood  then  only  question  regarding purchase  of  goods  or  availing  any  activities from  trader  or  professional  arises.  The complainants  are  not  carrying  on  business  of purchase from opponents. Otherwise also hostel premises  can  be  constructed  and  there  is  no direct  relation  between  commercial  activity. Therefore,  the  defence  of  opponents  that complainants  are  carrying  on  business activities  and  thereby  complainants  are  not consumer is not acceptable. Hence, we hold that complainants  are  consumer  of  opponents  and defence of opponents is rejected.”                          (emphasis supplied)   

20. The National Commission has erred by applying the

decision in M/s Kusumam Hotels Pvt. Ltd. case (supra)

in  holding  that  the  appellant-Society  is  not  a

consumer in terms of the definition under Section 2(d)

of the Consumer Protection Act, 1986 as the purchase

of tiles and laying in the same in the rooms of the

girl’s hostel run by the appellant-Society is clearly

not for any commercial purpose. The decision in  M/s

Kusumam  Hotels  Pvt.  Ltd.  case  (supra)  has  no

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application  to  the  present  fact  situation  for  the

reason that in the said case complainant was a hotel

and  the  tiles  purchased  by  the  hotel  were  for

commercial purpose as the hotel business involves the

act of profit making, whereas in the instant case the

girl’s  hostel  in  question  is  run  by  the

appellant-Society as one among its various charitable

activities for the benefit of adivasi students. The

appellant-Society is supporting adivasi/tribal girls

to  pursue  their  education  by  providing  hostel

facilities. The expenses for the food and electricity

are  being  paid  by  the  inmates  of  the  hostel.  The

appellant-Society is maintaining the hostel free of

cost and no charges in the form of rent, repairs and

maintenance are collected from the inmates. Thus, the

appellant-Society  cannot  be  considered  as  any

commercial establishment striving for profit.

21. Further, the National Commission while passing the

impugned order has ignored certain facts which throws

light  on  callous  attitude  on  the  part  of  the

respondents  viz., when the defect in the tiles were

brought to the notice of the respondents by sending

various letters, there was no action on their part.

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Later  a  local  agent  on  behalf  of  the  respondent

no.1-Company visited the premises of the girl’s hostel

and verified that the said tiles were defective and

damaged. However, no proper attention was paid by the

respondents towards the issue. Further, to assess the

damage caused to the appellant-Society by the use of

the said defective tiles, a registered architect and

interior  designer,  J.M.  Vimawala  was  hired  by  the

appellant-Society,  who  in  his  report  declared  the

tiles to be defective and assessed the damage to the

appellant-Society  to  the  tune  of  Rs.4,27,712.37.

Thereafter, the appellant-Society made a demand of the

said amount as damages from the respondents vide legal

notice dated 12.08.2002. But the respondents did not

pay any heed to the said notice as well. Because of

such  irresponsible  and  indifferent  attitude  on  the

part  of  the  respondents,  the  appellant-Society  was

compelled to file Consumer Complaint No. 743 of 2002

before the District Forum.

22. The  District  Forum,  after  appreciating  the

pleadings and evidence on record has rightly awarded

Rs.  2  lakhs  as  damages  to  the  appellant-Society

towards defective tiles supplied by the respondents

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along with compensation towards mental harassment and

cost of present proceedings with interest @9% p.a.

from  the  date  of  complaint  till  its  recovery.  In

concurring with the findings of the District Forum,

the State Commission, after proper re-appreciation of

the facts and evidence on record has rightly exercised

its  jurisdiction  by  dismissing  the  appeal  of  the

respondents. The National Commission should not have

interfered  with  the  concurrent  findings  of  fact

recorded  in  the  judgment  impugned  before  it

particularly  having  regard  to  the  nature  of  the

jurisdiction conferred upon it by Section 21 of the

Consumer  Protection  Act,  1986.  Section  21  of  the

aforesaid Act reads thus:

“21. Jurisdiction of the National Commission.— Subject to the other provisions of this Act, the  National  Commission  shall  have jurisdiction— (a) to entertain—

(i) complaints  where  the  value  of  the goods  or  services  and  compensation,  if any, claimed exceeds rupees one crore; and (ii) appeals  against  the  orders  of  any State Commission; and

(b) to  call  for  the  records  and  pass appropriate  orders  in  any  consumer  dispute which is pending before or has been decided by any State Commission where it appears to the National Commission that such State Commission has exercised a jurisdiction not vested in it by  law,  or  has  failed  to  exercise  a

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jurisdiction so vested, or has acted in the exercise of its jurisdiction illegally or with material irregularity.”

23. The  National  Commission  has  to  exercise  the

jurisdiction vested in it only if the State Commission

or the District Forum has either failed to exercise

their jurisdiction or exercised when the same was not

vested  in  them  or  exceeded  their  jurisdiction  by

acting illegally or with material irregularity. In the

instant  case,  the  National  Commission  has  certainly

exceeded  its  jurisdiction  by  setting  aside  the

concurrent  finding  of  fact  recorded  in  the  order

passed by the State Commission which is based upon

valid and cogent reasons. The National Commission has

reversed the order passed by the State Commission by

wrongly applying the decision of  M/s Kusumam Hotels

Pvt. Ltd.  case (supra) to the set of facts in the

present case. In the said case, the complainant was a

hotel, it was considered to be a commercial entity and

therefore,  it  was  kept  out  of  the  purview  of  the

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

Consumer Protection Act, 1986. However, the National

Commission has failed to appreciate the fact that in

the  present  case,  the  appellant-Society  is  not  a

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commercial establishment rather a registered society

helping  the  adivasi  students  in  their  education  by

providing hostel facilities. The charges, if any, for

accommodation in the hostel are for maintaining the

hostel  and  not  for  making  profit.  Thus,  the

appellant-Society  is  consumer  within  the  meaning  of

the term ‘consumer’ under Section 2(d) of the Consumer

Protection  Act,  1986.  The  National  Commission  has

erroneously accepted the contention urged on behalf of

the  respondents  in  the  revisional  proceedings  that

supply of tiles to the appellant-Society by respondent

no.  1  through  its  local  agent  is  for  commercial

purpose. The said finding is based on the decision in

M/s Kusumam Hotels Pvt. Ltd. case (supra), which case

absolutely has no application to the fact situation.

24. Therefore, the concurrent finding of fact recorded

by  the  District  and  the  State  Commission  has  been

erroneously interfered with by the National Commission

by passing the impugned order, which is liable to be

set aside. For the aforesaid reasons, the appeal of

the appellant-Society must succeed.

25. For  the  reasons  stated  supra  this  appeal  is

allowed, the impugned order of the National Commission

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is hereby set aside and we restore the order of the

District  Forum  which  is  affirmed  by  the  State

Commission. The matter has been under litigation for

the last fourteen years, we direct the respondents to

pay or deposit the amount so awarded by the District

Forum along with interest @9% p.a. within six weeks

from the date of receipt of the copy of this judgment.

The costs of Rs.50,000/- of these proceedings are also

awarded in favour of the appellant-Society.  

                                  ……………………………………………………………CJI   [T.S. THAKUR]

 ………………………………………………………………J.   [V. GOPALA GOWDA]

                           ………………………………………………………………J.   

[R. BANUMATHI]

New Delhi, 2nd August, 2016