NATIONAL INSURANCE CO. LTD v. HARSOLIA MOTORS & Ors.

448 SUPREME COURT REPORTS [2023] 3 S.C.R. 448 [2023] 3 S.C.R. A B C D E F G H NATIONAL INSURANCE CO. LTD. v. HARSOLIA MOTORS AND OTHERS (Civil Appeal No(s). 5352-5353 of 2007) APRIL 13, 2023 [AJAY RASTOGI AND C. T. RAVIKUMAR, JJ.] Consumer Protection Act, 1986 – s.2(1)(d) – Respondent (commercial enterprise) had taken fire insurance policy from the appellant insurance company – Respondent sufferred damage due to fire – Appellant denied the claim of respondent – Respondent filed complaint before the State Commission for compensation – State Commission held that respondent was not a “consumer” as defined u/s. 2(1)(d) of the Consumer Protection Act, 1986, and the complaint was not maintainable – However, National Commission held that the respondent was a “consumer” and the complaint was maintainable – Issue before the Supreme Court was, whether the insurance policy taken by respondent (commercial enterprise) insured amounts to hiring of services for “commercial purpose” thereby excluded from the purview of the expression “consumer” as defined u/s.

2(1)(d) of the Act, 1986 – Held: There is no such exclusion from the definition of the term “consumer” either to a commercial enterprise or to a person who is covered under the expression “person” defined in Section 2(1)(m) of the Act, 1986 merely because it is a commercial enterprise – Each case has to be examined on its own facts and circumstances – What needs to be determined is whether the insurance service had a close and direct nexus with the profit generating activity and whether the dominant intention or dominant purpose of the transaction was to facilitate some kind of profit generation for the insured or to the beneficiary – In the instant case, hiring of insurance policy is clearly an act for indemnifying a risk of loss/damages and there is no element of profit generation – Judgment of the National Consumer Disputes Redressal Commission upheld. Consumer Protection Act, 1986 – Nature of the insurance contract – Insurance contracts are contracts of indemnity whereby one undertakes to indemnify another against loss/damage or liability 448 NATIONAL INSURANCE CO. LTD. v.

HARSOLIA MOTORS AND OTHERS 449 arising from an unknown or contingent event and is applicable only to some contingency or act likely to come in future. A Consumer Protection Act, 1986 – A social benefit-oriented legislation – Discussed. Words and Phrases – “Consumer”, “Commercial Purpose” – Discussed – Consumer Protection Act, 1986. Dismissing the appeals, the Court HELD:

The provisions of the Act, 1986 thus have to be construed in favour of the consumer to achieve the purpose of enactment as it is a social benefit-oriented legislation. The primary duty of the Court/Commission while construing the provisions of such an Act is to adopt a constructive approach subject to that it should not do violence to the language of the provisions and is not contrary to attempted objective of the enactment. [Para 24][458-F]

The word “consumer” so defined does not include a person, who, in case of goods obtains such goods for resale or for any commercial purpose, or who, in case of service, avails of such services, for any commercial purpose. An explanation appended to the above definition states that the expression “commercial purpose” does not include the use by the buyer of such goods or the person availing such service or services, exclusively for the purpose of earning his livelihood by means of self-employment. [Para 27][460-F]

What is culled out is that there is no such exclusion from the definition of the term “consumer” either to a commercial enterprise or to a person who is covered under the expression “person” defined in Section 2(1)(m) of the Act, 1986 merely because it is a commercial enterprise. To the contrary, a firm whether registered or not is a person who can always invoke the jurisdiction of the Act, 1986 provided it falls within the scope and ambit of the expression “consumer” as defined under Section 2(1)(d) of the Act, 1986. Applying the above principles to the present case, what needs to be determined is whether the insurance service has a close and direct nexus with the profit B C D E F G H 450 SUPREME COURT REPORTS [2023] 3 S.C.R. generating activity and 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. The fact that the insured is a commercial enterprise is unrelated to the determination of whether the insurance policy shall be counted as a commercial purpose within the purview of Section 2(1)(d) of the Act. [Paras 36, 37][466-C-F]

Two things are culled out; (i) whether the goods are purchased for resale or for commercial purpose; or (ii) whether the services are availed for any commercial purpose. The two-fold classification is commercial purpose and non-commercial purpose. If the goods are purchased for resale or for commercial purpose, then such consumer would be excluded from the coverage of the Act, 1986. [Para 39][468-B-C]

What needs to be determined is whether the insurance service had a close and direct nexus with the profit generating activity and whether the dominant intention or dominant purpose of the transaction was to facilitate some kind of profit generation for the insured or to the beneficiary and our answer is in the negative and accordingly is of the view that the complaint filed by the respondent insured herein has no close or direct nexus with the profit generating activity and the claim of insurance is to indemnify the loss which the respondent insured had suffered and the Commission has rightly held that the respondent is a “consumer” under Section 2(1) (d) of the Act, 1986. It can be concluded that in the instant case hiring of insurance policy is clearly an act for indemnifying a risk of loss/damages and there is no element of profit generation and still what has been expressed by this Court is illustrative; it will always open to be examined on the facts of each case, as to the transaction in reference to which the claim has been raised has any close and direct nexus with profit generating activity. [Paras 43, 46][470-C-E; 470-B-C]