Laxmi Engineering Works v. P.S.G. Industrial Institute
A buyer of goods for 'commercial purpose' is not a consumer, except where goods are bought and used exclusively to earn a livelihood by self-employment.
Facts
Laxmi Engineering Works, a proprietary concern, purchased machinery (a universal turning machine) financed by the State Finance Corporation for manufacturing auto parts. Alleging the machine was defective, it filed a complaint before the State Commission, which dismissed it on the ground that the goods were bought for a commercial purpose. The matter reached the Supreme Court on the question whether the buyer was a 'consumer'.
Issues
- What is the meaning and scope of the expression 'commercial purpose' in Section 2(1)(d)?
- Does the Explanation (self-employment for earning livelihood) save the buyer from exclusion, and how is the test to be applied?
Arguments
The appellant argued that the machinery was bought to earn a livelihood through self-employment and was therefore not for a 'commercial purpose', so it remained a consumer. The respondent contended that goods purchased to run a manufacturing business for profit fall squarely within 'commercial purpose' and are excluded from the Act.
Held
The Court held that whether a purchase is for a 'commercial purpose' is a question of fact in each case. Goods bought and used for carrying on an activity on a large scale for profit are for a commercial purpose, but the 1993 Explanation carves out an exception: goods bought and used by a person exclusively for earning a livelihood by means of self-employment are not for a commercial purpose. The Court clarified that the size of the activity and use of hired help do not automatically defeat the exception, the dominant intention and the self-employment-for-livelihood test being decisive. As the Explanation operated retrospectively (clarificatory), the matter was remitted for fresh consideration.
Ratio decidendi
A person who buys goods and uses them exclusively to earn his livelihood by self-employment is a 'consumer'; but goods bought to run a commercial enterprise for profit are for a 'commercial purpose' and the buyer is not a consumer. 'Commercial purpose' is a question of fact decided on the facts of each case.
Significance
The leading authority interpreting 'commercial purpose' and the self-employment/livelihood exception under the Consumer Protection Act; consistently followed and its test was carried into the Explanation to Section 2(7) of the 2019 Act.
Related
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