When companies become consumers


Do companies, firms or registered societies have rights under consumer law?

We know that if an individual purchases a refrigerator or television that suddenly stops working, she can seek redress as a `consumer' under the Consumer Protection Act. But what if a private company had purchased this refrigerator or television? Or what if this private company has had its telephone lines disconnected despite its prompt payment of bills. Do companies or firms or registered societies have rights under consumer law? This question is one that has confused several persons in the country.There is one school of thought that believes that companies and firms, being essentially of a "commercial" nature, cannot (and should not) be entitled to access redress mechanisms set up exclusively to assist (individual) consumers. The other school of thought believes that consumer law aims to protect the `end consumer' (i.e., the last consumer in the chain of supply) and therefore irrespective of shape or size, such person or persons or companies or firms, will be entitled to seek recourse under the consumer law.

Who is a consumer?

This dichotomy of views is created by the definition of "consumer" under the Consumer Protection Act, which expressly excludes "a person who obtains goods for resale or for any commercial purpose". While the exclusion of a retailer (person who obtains goods for resale) is obvious, the exclusion of persons who obtain goods "for any commercial purpose" has, as outlined above, caused some uncertainty. The Consumer Forum has had to decide this issue, when disputes on this question have come up. In a case filed by a private company against an air-conditioner manufacturer, the National Consumer Commission found in favour of the private company, accepting that the private company was indeed a consumer. In response to the "commercial purpose" exclusion, the Commission said that a defective air-conditioner supplied to the guesthouse of a private company had no direct nexus with the commercial activity of the company. This decision and subsequent decisions of Consumer Fora and Commissions have brought more clarity to this issue.On the question of deficient services though, the issue is more complicated. Till 2003, all complaints relating to deficient services, irrespective of whether they were for any commercial purpose or not, could be filed before the Consumer Forum. In 2003, by an amendment to the Consumer Protection Act, Parliament introduced a clause that sought to exclude "a person who avails of services for any commercial purpose" from being a "consumer" under the Act.Consequently, since 2003, several Consumer Fora and Commissions have rejected complaints filed by companies and firms, alleging deficient service, basing their decisions on the "commercial purpose" argument. However, a recent decision of the National Consumer Commission has sought to resolve this question. The Commission (rightly) held that for a complaint to be rejected on the "commercial purpose" argument, the services must be hired for an activity directly intended to generate profit. Thus where the services hired (or goods purchased) are not directly intended to generate profit, it would not be hit by the "commercial purpose" exclusion.India's consumer law is fairly unique in this respect. It rightly focusses on the nature of the relationship; distinguishing a seller from a consumer. Irrespective of who or what the consumer is - big or small, incorporated companies or unregistered collectives, the consumer law seeks to regulate behaviour of traders in the market place and provides unfettered access to its redressal mechanism to all such consumers. (The writer works with CAG, which offers a free `Legal & Consumer Advice Clinic' to assist citizens in finding answers to queries or complaints they may have. Contact 24460387 / 24914358 or

Recommended for you