Pure business to business disputes cannot be construed as consumer disputes

Factual Matrix:

The Hon’ble Supreme Court vide its judgment dated 22.02.2022 in the matter of “Shrikant G. Mantri vs. Punjab National Bank, C.A. 11397/2016” had the occasion to deal with whether a ‘pure business to business’ dispute can be construed as a “consumer dispute” under Consumer Protection Act, 1986.

In the present matter, the Appellant, a stock broker by profession had availed an overdraft facility from the Respondent bank and pledged certain shares with the bank to secure the overdraft. Since the overdraft facility became sticky and irregular, Respondent bank sold a part of the pledged shares to recover its dues. Thereafter, a settlement was arrived at between the Appellant and Respondent whereunder the Appellant paid a sum of Rs. 2 crores to the bank in exchange of a no-dues certificate.

The Appellant thereafter, filed a complaint before the National Consumer Disputes Redressal Commission (hereinafter referred to as NCDRC) alleging deficiency in services on part of the Respondent bank as it failed to return the remaining shares that were pledged by the Appellant.

The said complaint was dismissed by the NCDRC vide its order dated 01.06.2016 wherein it held that the Appellant had availed the services of the Respondent bank for ‘commercial purpose’ and as such, he was not a consumer as envisaged under Section 2(1)(d) of the Consumer protection Act, 1986 (hereinafter referred to as Act).

Aggrieved by the order, the Appellant filed a Civil Appeal before the Hon’ble Supreme Court of India which vide order dated 22.02.2022 dismissed the appeal and upheld the judgement passed by the NCDRC.

Analysis of the judgment:

The Hon’ble Supreme Court observed that the legislative intent is to keep the commercial transactions out of the purview of the Consumer Protection Act, 1986 while at the same time, give benefit of the said Act to a person who enters into such commercial transactions, when he uses such goods or avails such services exclusively for the purposes of earning his livelihood by means of “self-employment.”

The Supreme Court relied on the judgment passed in “Laxmi Engineering Works vs. P.S.G. Industrial Institute, (1995) 3 SCC 583” to hold that when 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.

In the present matter, the appellant took the overdraft facility from the Respondent bank and also sought enhancement of the same from time to time in furtherance of his business as a stockbroker and for the purpose of enhancing his profits. Thus, the relation between the appellant and the respondent is purely a “business to business” relationship.

The transactions between the appellant and the respondent come within the ambit of ‘commercial purpose’ and it cannot be said that the services were availed by the appellant “exclusively for the purposes of earning his livelihood by means of self-employment”.

If the interpretation as sought to be placed by the appellant is to be accepted, then the ‘business to business’ disputes would also have to be construed as consumer disputes, thereby defeating the very purpose of providing speedy and simple redressal to consumer disputes.